UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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TTEC HOLDINGS, INC. AND SUBSIDIARIES
MARCH 31, 2022 FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands, except share amounts)
(Unaudited)
March 31, | December 31, |
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| 2021 |
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ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | | $ | | |||
Accounts receivable, net of allowance of $ |
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Prepaids and other current assets |
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Income and other tax receivables | | | |||||
Total current assets |
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Long-term assets | |||||||
Property, plant and equipment, net |
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Operating lease assets | | | |||||
Goodwill |
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Deferred tax assets, net |
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Other intangible assets, net |
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Other long-term assets |
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Total long-term assets |
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Total assets | $ | | $ | | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY | |||||||
Current liabilities | |||||||
Accounts payable | $ | | $ | | |||
Accrued employee compensation and benefits |
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Other accrued expenses |
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Income tax payable |
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Deferred revenue |
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Current operating lease liabilities | | | |||||
Other current liabilities | | | |||||
Total current liabilities |
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Long-term liabilities | |||||||
Line of credit |
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Deferred tax liabilities, net |
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Non-current income tax payable | | | |||||
Non-current operating lease liabilities | | | |||||
Other long-term liabilities |
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Total long-term liabilities |
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Total liabilities |
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Commitments and contingencies (Note 9) | |||||||
Redeemable noncontrolling interest |
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Stockholders’ equity | |||||||
Preferred stock; $ |
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Common stock; $ |
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Additional paid-in capital |
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Treasury stock at cost: |
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Accumulated other comprehensive income (loss) |
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Retained earnings |
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Noncontrolling interest |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity and mezzanine equity | $ | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
1
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
(Amounts in thousands, except per share amounts)
(Unaudited)
Three months ended March 31, |
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| 2021 |
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$ | | $ | | ||||
Operating expenses | |||||||
Cost of services (exclusive of depreciation and amortization presented separately below) |
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Selling, general and administrative |
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Depreciation and amortization |
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Restructuring charges, net | | | |||||
Impairment losses |
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Total operating expenses |
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Income from operations |
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Other income (expense) | |||||||
Interest income |
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Interest expense |
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Other income (expense), net |
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Total other income (expense) |
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Income before income taxes |
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Provision for income taxes |
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Net income |
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Net income attributable to noncontrolling interest |
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Net income attributable to TTEC stockholders | $ | | $ | | |||
Other comprehensive income (loss) | |||||||
Net income | $ | | $ | | |||
Foreign currency translation adjustments |
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Derivative valuation, gross |
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Derivative valuation, tax effect |
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Other, net of tax |
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Total other comprehensive income (loss) |
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Total comprehensive income (loss) |
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Less: Comprehensive income attributable to noncontrolling interest |
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Comprehensive income (loss) attributable to TTEC stockholders | $ | | $ | | |||
Weighted average shares outstanding | |||||||
Basic |
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Diluted | |
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Net income per share attributable to TTEC stockholders | |||||||
Basic | $ | | $ | | |||
Diluted | $ | | $ | | |||
Dividends declared and not paid per share outstanding | $ | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
2
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders’ Equity and Mezzanine Equity
(Amounts in thousands)
(Unaudited)
Three months ended March 31, 2021 and 2022
Stockholders’ Equity of the Company |
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Other |
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Common Stock | Treasury | Additional | Comprehensive | Retained | Noncontrolling | Mezzanine |
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Shares | Amount | Stock | Paid-in Capital | Income (Loss) | Earnings | interest | Total Equity | Equity |
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Balance as of December 31, 2020 |
| | $ | | $ | ( | $ | | $ | ( | $ | | $ | | $ | | $ | | |||||||||
Net income |
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Dividends to shareholders ($ |
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Dividends distributed to noncontrolling interest |
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Foreign currency translation adjustments |
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Derivatives valuation, net of tax |
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Vesting of restricted stock units |
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Equity-based compensation expense |
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Other, net of tax |
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Balance as of March 31, 2021 |
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Stockholders’ Equity of the Company |
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Other |
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Common Stock | Treasury | Additional | Comprehensive | Retained | Noncontrolling | Mezzanine |
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Shares | Amount | Stock | Paid-in Capital | Income (Loss) | Earnings | interest | Total Equity | Equity |
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Balance as of December 31, 2021 |
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Net income |
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Dividends to shareholders ($ |
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Dividends distributed to noncontrolling interest |
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Foreign currency translation adjustments |
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Derivatives valuation, net of tax |
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Vesting of restricted stock units |
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Equity-based compensation expense |
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Other, net of tax |
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Balance as of March 31, 2022 |
| | $ | | $ | ( | $ | | $ | ( | $ | | $ | | $ | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
3
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
Three Months Ended March 31, | |||||||
| 2022 |
| 2021 |
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Cash flows from operating activities | |||||||
Net income | $ | | $ | | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization |
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Amortization of contract acquisition costs |
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Amortization of debt issuance costs |
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Imputed interest expense and fair value adjustments to contingent consideration |
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Provision for credit losses |
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(Gain) loss on disposal of assets |
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Impairment losses | 1,112 | 3,517 | |||||
Deferred income taxes |
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Excess tax benefit from equity-based awards |
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Equity-based compensation expense |
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(Gain) loss on foreign currency derivatives |
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Changes in assets and liabilities, net of acquisitions: | |||||||
Accounts receivable |
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Prepaids and other assets |
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Accounts payable and accrued expenses |
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Deferred revenue and other liabilities |
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Net cash provided by operating activities |
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Cash flows from investing activities | |||||||
Proceeds from sale of long-lived assets |
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Purchases of property, plant and equipment, net of acquisitions |
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Acquisitions, net of cash acquired of |
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Net cash used in investing activities |
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Cash flows from financing activities | |||||||
Net proceeds (borrowings) from line of credit |
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Payments on other debt |
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Payments of contingent consideration and hold-back payments to acquisitions |
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Dividends paid to shareholders | | | |||||
Payments to noncontrolling interest | ( | ( | |||||
Tax payments related to issuance of restricted stock units | ( | ( | |||||
Payments of debt issuance costs |
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Net cash used in financing activities |
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Effect of exchange rate changes on cash, cash equivalents and restricted cash |
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(Decrease) increase in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash, beginning of period |
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Cash, cash equivalents and restricted cash, end of period | $ | | $ | | |||
Supplemental disclosures | |||||||
Cash paid for interest | $ | | $ | | |||
Cash paid for income taxes | $ | | $ | | |||
Non-cash investing and financing activities | |||||||
Acquisition of long-lived assets through finance leases | $ | | $ | | |||
Acquisition of equipment through increase in accounts payable, net | $ | | $ | ( | |||
Dividend declared but not paid | $ | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
4
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1)OVERVIEW AND BASIS OF PRESENTATION
Summary of Business
TTEC Holdings, Inc. (“TTEC”, “the Company”; pronounced “T-TEC”) is a leading global customer experience as a service (“CXaaS”) partner for many of the world’s most iconic and disruptive brands. TTEC designs, builds, orchestrates, and delivers seamless digitally enabled customer experiences that are designed to increase brand value, customer loyalty, revenue and profitability through personalized, outcome-based interactions. The Company helps clients improve their customer satisfaction while lowering their total cost to serve by combining innovative digital solutions with service capabilities that deliver a frictionless customer experience (“CX”) across different channels and phases of the customer lifecycle. TTEC’s
The Company operates and reports its financial results of operation through two business segments: TTEC Digital and TTEC Engage.
● | TTEC Digital is one of the largest pure-play CX technology service providers with expertise in CX strategy, digital consulting, and transformation enabled by proprietary CX applications and technology partnerships. TTEC Digital designs, builds, and operates robust digital experiences for clients and their customers through the contextual integration and orchestration of customer relationship management (“CRM”), data, analytics, CXaaS technology, and intelligent automation to ensure high-quality, scalable CX outcomes. |
● | TTEC Engage provides the digitally enabled CX managed services to support our clients’ end-to-end customer interaction delivery at scale. The segment delivers omnichannel customer care, tech support, order fulfillment, customer acquisition, growth, and retention services with industry specialization and distinctive CX capabilities for hypergrowth brands. TTEC Engage also delivers digitally enabled back office and industry specific specialty services including artificial intelligence (“AI”) operations, content moderation, and fraud management services. |
TTEC Digital and TTEC Engage strategically come together under our unified offering, Humanify® CXaaS, which drives measurable customer results for clients through the delivery of personalized, omnichannel experiences. Our Humanify® cloud platform provides a fully integrated ecosystem of CX offerings, including messaging, AI, machine learning, robotic process automation, analytics, cybersecurity, CRM, knowledge management, journey orchestration, and traditional voice solutions. Our end-to-end CXaaS platform differentiates us from competitors by combining design, strategic consulting, technology, data analytics, process optimization, system integration, and operational excellence along with our decades of industry know-how. This unified offering is value-oriented, outcome-based and delivered to large enterprises, governments, and hypergrowth companies on a global scale.
Basis of Presentation
The Consolidated Financial Statements are comprised of the accounts of TTEC, its wholly owned subsidiaries, its
5
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The unaudited Consolidated Financial Statements do not include all of the disclosures required by accounting principles generally accepted in the U.S. (“GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited Consolidated Financial Statements reflect all adjustments which, in the opinion of management, are necessary to state fairly the consolidated financial position of the Company and the consolidated results of operations and comprehensive income (loss) and the consolidated cash flows of the Company. All such adjustments are of a normal, recurring nature. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
These unaudited Consolidated Financial Statements should be read in conjunction with the Company’s audited Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Use of Estimates
The preparation of the Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates including those related to derivatives and hedging activities, income taxes including the valuation allowance for deferred tax assets, litigation reserves, restructuring reserves, allowance for credit losses, contingent consideration, redeemable noncontrolling interest, and valuation of goodwill, long-lived and intangible assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from these estimates under different assumptions or conditions.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents consist of cash, primarily held in interest-bearing investments, and liquid short-term investments, which have original maturities of less than 90 days. Restricted cash includes cash whereby the Company’s ability to use the funds at any time is contractually limited or is generally designated for specific purposes arising out of certain contractual or other obligations.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Condensed Consolidated Balance Sheets that sum to the amounts reported in the Condensed Consolidated Statement of Cash Flows (in thousands):
March 31, 2022 |
| December 31, 2021 | ||||||
Cash and cash equivalents | $ | |
| $ | | |||
Restricted cash included in "Prepaid and other current assets" |
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Total | $ | |
| $ | |
Concentration of Credit Risk
The Company is exposed to credit risk in the normal course of business, primarily related to accounts receivable and derivative instruments. Historically, the losses related to credit risk have been immaterial. The Company regularly monitors its credit risk to mitigate the possibility of current and future exposures resulting in a loss. The Company evaluates the creditworthiness of its clients prior to entering into an agreement to provide services and as necessary through the life of the client relationship. The Company does not believe it is exposed to more than a nominal amount of credit risk in its derivative hedging activities, as the Company diversifies its activities across eight investment-grade financial institutions.
6
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Recently Adopted Accounting Pronouncements
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which now requires the acquirer to account for revenue contracts in accordance with Topic 606 as if it had acquired the contract, versus recording these assets and liabilities at fair value on acquisition date. The ASU is effective for interim and annual periods beginning on or after December 15, 2022, with early adoption permitted. The Company adopted the new guidance during the fourth quarter of 2021 which required application to all acquisitions completed during the adoption year. See further discussion in Note 2.
Other Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform” (Topic 848), which provides optional expedients and exceptions for contracts, hedging relationships, and other transactions affected by reference rate reform due to the anticipated cessation of the London Interbank Offered Rate (”LIBOR”). The ASU is effective from March 12, 2020, may be applied prospectively and could impact the accounting for LIBOR provisions in the Company’s credit facility agreement. In addition, in January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform – Scope,” which clarified the scope of ASC 848 relating to contract modifications. The Company has not yet adopted the standard but does not expect that the adoption of this guidance will have a material impact on the Company’s financial position, results of operations or cash flows.
(2)ACQUISITIONS AND DIVESTITURES
Avtex
On
Total cash paid at acquisition was $
During the fourth quarter of 2021, TTEC implemented ASU 2021-08 which required an accounting modification to the deferred revenue balance as of the acquisition date (see discussion above in Note 1). The deferred revenue balance was evaluated as if TTEC had been the company securing the initial contract and accounted for these contracts in accordance with ASC 606. Based on this re-assessment, the $
A multi-period excess earnings method under the income approach was used to estimate the fair value of the customer relationships intangible asset. The significant assumptions utilized in calculating the fair value of the customer relationships intangible asset were the customer attrition rate, revenue growth rates, forecasted EBITDA, contributory asset charge, and the discount rate.
7
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following summarizes the fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands):
Acquisition Date |
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Fair Value |
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Cash | $ | | ||
Accounts receivable, net |
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Prepaid expenses |
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Current income tax receivables |
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Net fixed assets | | |||
Right of use assets | | |||
Other Assets | | |||
Tradename | | |||
Intellectual property intangible | | |||
Customer relationships |
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Goodwill | | |||
$ | | |||
Accounts payable | $ | | ||
Accrued employee compensation |
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Accrued expenses |
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Right of use liability - current | | |||
Deferred revenue | | |||
Accrued income taxes | | |||
Deferred tax liability | | |||
Right of use liability - noncurrent |
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$ | | |||
Total purchase price | $ | |
In the first quarter of 2022, the Company finalized the valuation of Avtex for the acquisition date assets acquired and liabilities assumed and determined that no material adjustments to any of the balances were required.
The Avtex customer relationships, intellectual property intangible, and tradename are being amortized over useful lives of
Financial Impact of Acquired Businesses
The acquired business purchased in 2021 noted above contributed revenues of $
The unaudited proforma financial results for the three months ended March 31, 2021, combines the consolidated results of the Company and Avtex assuming the acquisition had been completed on January 1, 2020. The reported revenue and net income of $
8
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The Company did not have any material, nonrecurring proforma adjustments directly attributable to the business combination included in the reported proforma revenue earnings. These proforma amounts have been calculated after applying the Company’s accounting policies and adjusting the respective acquired businesses’ results to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment, and intangible assets had been applied from the date indicated, with the consequential tax effects.
The unaudited proforma consolidated results are not to be considered indicative of the results if this acquisition occurred in the periods mentioned above, or indicative of future operations or results. Additionally, the proforma consolidated results do not reflect any anticipated synergies expected as a result of the acquisition.
Subsequent Event
Certain Assets of Faneuil
Total cash paid at acquisition was $
(3)SEGMENT INFORMATION
The Company reports the following two segments:
TTEC Digital is one of the largest pure-play CX technology service providers with expertise in CX strategy, digital consulting and transformation enabled by proprietary CX applications and technology partnerships. TTEC Digital designs, builds, and operates robust digital experiences for clients and their customers through the contextual integration and orchestration of CRM, data, analytics, CXaaS technology, and intelligent automation to ensure high-quality, scalable CX outcomes.
● | Technology Services: Our technology services design, integrate, and operate highly scalable, digital omnichannel technology solutions in the cloud, on premise, or hybrid environment, including journey orchestration, automation and AI, knowledge management, and workforce productivity. |
● | Professional Services: Our management consulting practices deliver customer experience strategy, analytics, process optimization, and learning and performance services. |
TTEC Engage provides the digitally enabled CX managed services to support our clients’ end-to-end customer interaction delivery at scale. The segment delivers omnichannel customer care, tech support, order fulfillment, customer acquisition, growth, and retention services with industry specialization and distinctive CX capabilities for hypergrowth brands. TTEC Engage also delivers digitally enabled back office and industry specific specialty services including AI operations, content moderation, and fraud management services.
9
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
● | Customer Acquisition, Growth, and Retention Services: Our customer growth and acquisition services optimize the buying journeys for acquiring new customers by leveraging technology and analytics to deliver personal experiences that we believe increase the quantity and quality of leads and customers. |
● | Customer Care, Tech Support, and Order Fulfillment Services: Our customer care, technical support, and order fulfillment services provide turnkey contact center solutions, including digital omnichannel technologies, associate recruiting and training, facilities, and operational expertise to create exceptional customer experiences across all touchpoints. |
● | Digitally Enabled Back Office and Specialty Services: Our digital AI operations, content moderation, and fraud detection and prevention services provide clients with data tagging and annotation capabilities to train and enable AI platforms, community content moderation, and compliance to meet client content standards, and proactive fraud solutions to assist our clients in the detection and prevention of fraud. |
The Company allocates to each segment its portion of corporate operating expenses. All intercompany transactions between the reported segments for the periods presented have been eliminated.
The following tables present certain financial data by segment (in thousands):
Three Months Ended March 31, 2022
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Revenue | Sales | Revenue | Amortization | Operations |
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TTEC Digital | $ | | $ | — | $ | | $ | | $ | | ||||||
TTEC Engage |
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Total | $ | | $ | — | $ | | $ | | $ | |
Three Months Ended March 31, 2021
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Revenue | Sales | Revenue | Amortization | Operations | ||||||||||||
TTEC Digital | $ | | $ | ( | $ | | $ | | $ | | ||||||
TTEC Engage |
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Total | $ | | $ | ( | $ | | $ | | $ | |
Three Months Ended | |||||||
March 31, | |||||||
2022 |
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| ||||
Capital Expenditures | |||||||
TTEC Digital | $ | |
| $ | |
| |
TTEC Engage |
| |
| | |||
Total | $ | |
| $ | |
|
March 31, 2022 |
| December 31, 2021 | ||||||
Total Assets | ||||||||
TTEC Digital | $ | |
| $ | | |||
TTEC Engage |
| |
| | ||||
Total | $ | |
| $ | | |||
10
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table presents revenue based upon the geographic location where the services are provided (in thousands):
Three Months Ended March 31, | ||||||||
| 2022 |
| 2021 |
| ||||
Revenue | ||||||||
United States | $ | | $ | |
| |||
Philippines |
| |
| | ||||
Europe / Middle East / Africa |
| |
| | ||||
Latin America |
| |
| | ||||
Canada |
| |
| | ||||
Asia Pacific / India |
| |
| | ||||
Total | $ | |
| $ | |
(4)SIGNIFICANT CLIENTS AND OTHER CONCENTRATIONS
The Company had
To limit the Company’s credit risk with its clients, management performs periodic credit evaluations, maintains allowances for credit losses and may require pre-payment for services from certain clients. Based on currently available information, management does not believe significant credit risk existed as of March 31, 2022.
Activity in the Company’s Allowance for credit losses consists of the following (in thousands):
Three Months Ended March 31, |
| ||||||
| 2022 |
| 2021 |
| |||
Balance, beginning of year | $ | | $ | | |||
Provision for credit losses |
| ( |
| | |||
Uncollectible receivables written-off |
| ( |
| ( | |||
Effect of foreign currency |
| |
| ( | |||
Balance, end of year | $ | | $ | |
Accounts Receivable Sales Agreement
The Company is party to an Uncommitted Receivables Purchase Agreement (“Agreement”) with Bank of the West (“Bank”), whereby from time-to-time the Company may elect to sell, on a revolving basis, U.S. accounts receivables of certain clients at a discount to the Bank for cash on a limited recourse basis. The maximum amount of receivables that the Company may sell to the Bank at any given time shall not exceed $
11
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
As of March 31, 2022 and December 31, 2021, the Company had factored $
(5)GOODWILL
Goodwill consisted of the following (in thousands):
|
|
|
| Effect of |
|
| ||||||||||
December 31, | Acquisitions / | Foreign | March 31, |
| ||||||||||||
2021 | Adjustments | Impairments | Currency | 2022 |
| |||||||||||
TTEC Digital | $ | | $ | — | $ | — | $ | | $ | | ||||||
TTEC Engage |
| |
| — | — | ( |
| | ||||||||
Total | $ | | $ | — | $ | — | $ | | $ | |
The Company performs a goodwill impairment assessment on at least an annual basis. The Company conducts its annual goodwill impairment assessment during the fourth quarter, or more frequently, if indicators of impairment exist. During the quarter ended March 31, 2022, the Company assessed whether any such indicators of impairment existed and concluded there were none.
(6)DERIVATIVES
Cash Flow Hedges
The Company enters into foreign exchange related derivatives. Foreign exchange derivatives entered into consist of forward and option contracts to reduce the Company’s exposure to foreign currency exchange rate fluctuations that are associated with forecasted revenue earned in foreign locations. Upon proper qualification, these contracts are designated as cash flow hedges. It is the Company’s policy to only enter into derivative contracts with investment grade counterparty financial institutions, and correspondingly, the fair value of derivative assets considers, among other factors, the creditworthiness of these counterparties. Conversely, the fair value of derivative liabilities reflects the Company’s creditworthiness. As of March 31, 2022, the Company has not experienced, nor does it anticipate, any issues related to derivative counterparty defaults. The following table summarizes the aggregate unrealized net gain or loss in Accumulated other comprehensive income (loss) for the three months ended March 31, 2022 and 2021 (in thousands and net of tax):
Three Months Ended March 31, | ||||||||
2022 |
| 2021 |
| |||||
Aggregate unrealized net gain/(loss) at beginning of period | $ | ( | $ | | ||||
Add: Net gain/(loss) from change in fair value of cash flow hedges | | ( | ||||||
Less: Net (gain)/loss reclassified to earnings from effective hedges | | | ||||||
Aggregate unrealized net gain/(loss) at end of period | $ | | $ | |
12
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The Company’s foreign exchange cash flow hedging instruments as of March 31, 2022 and December 31, 2021 are summarized as follows (amounts in thousands). All hedging instruments are forward contracts.
| Local |
|
|
|
| |||||||
Currency | U.S. Dollar | % Maturing | Contracts |
| ||||||||
Notional | Notional | in the next | Maturing |
| ||||||||
As of March 31, 2022 | Amount | Amount | 12 months | Through |
| |||||||
Canadian Dollar |
| | $ | | | % | ||||||
Philippine Peso |
| |
| | (1) | | % | |||||
Mexican Peso |
| |
| | | % | ||||||
$ | |
| Local |
|
|
| ||||||||
Currency | U.S. Dollar |
| ||||||||||
Notional | Notional |
|
|
| ||||||||
As of December 31, 2021 | Amount | Amount |
| |||||||||
Canadian Dollar |
| | $ | | ||||||||
Philippine Peso |
| |
| | (1) | |||||||
Mexican Peso |
| |
| | ||||||||
$ | | |||||||||||
(1) | Includes contracts to purchase Philippine pesos in exchange for New Zealand dollars and Australian dollars, which are translated into equivalent U.S. dollars on March 31, 2022 and December 31, 2021. |
Fair Value Hedges
The Company enters into foreign exchange forward contracts to economically hedge against foreign currency exchange gains and losses on certain receivables and payables of the Company’s foreign operations. Changes in the fair value of derivative instruments designated as fair value hedges are recognized in earnings in Other income (expense), net. As of March 31, 2022 and December 31, 2021 the total notional amounts of the Company’s forward contracts used as fair value hedges were $
Derivative Valuation and Settlements
The Company’s derivatives as of March 31, 2022 and December 31, 2021 were as follows (in thousands):
March 31, 2022 |
| ||||||
Designated | Not Designated |
| |||||
as Hedging | as Hedging | ||||||
Designation: | Instruments | Instruments |
| ||||
| Foreign |
| Foreign |
| |||
Derivative contract type: | Exchange | Exchange |
| ||||
Derivative classification: | Cash Flow | Fair Value | |||||
Fair value and location of derivative in the Consolidated Balance Sheet: | |||||||
Prepaids and other current assets | $ | | $ | | |||
Other long-term assets |
| |
| — | |||
Other current liabilities |
| ( |
| ( | |||
Other long-term liabilities |
| ( |
| — | |||
Total fair value of derivatives, net | $ | | $ | |
13
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
December 31, 2021 |
| ||||||
Designated | Not Designated |
| |||||
as Hedging | as Hedging | ||||||
Designation: | Instruments | Instruments |
| ||||
| Foreign |
| Foreign |
| |||
Derivative contract type: | Exchange | Exchange |
| ||||
Derivative classification: | Cash Flow | Fair Value | |||||
Fair value and location of derivative in the Consolidated Balance Sheet: | |||||||
Prepaids and other current assets | $ | | $ | | |||
Other long-term assets |
| |
| — | |||
Other current liabilities |
| ( |
| ( | |||
Other long-term liabilities |
| ( |
| — | |||
Total fair value of derivatives, net | $ | ( | $ | |
The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2022 and 2021 were as follows (in thousands):
Three Months Ended March 31, |
| ||||||
2022 | 2021 |
| |||||
Designated as Hedging |
| ||||||
Designation: | Instruments |
| |||||
Derivative contract type: | Foreign Exchange |
| |||||
Derivative classification: |
| Cash Flow | |||||
Amount of gain or (loss) recognized in Other comprehensive income (loss) - effective portion, net of tax | $ | | $ | | |||
Amount and location of net gain or (loss) reclassified from Accumulated OCI to income - effective portion: | |||||||
Revenue | $ | | $ | |
Three Months Ended March 31, |
| ||||||
2022 | 2021 |
| |||||
Designation: |
| Not Designated as Hedging Instruments | |||||
Derivative contract type: |
| Foreign Exchange | |||||
Derivative classification: |
| Fair Value | |||||
Amount and location of net gain or (loss) recognized in the Consolidated Statement of Comprehensive Income (Loss): | |||||||
Other income (expense), net |
| $ | |
| $ | ( |
(7)FAIR VALUE
The authoritative guidance for fair value measurements establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires that the Company maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.
14
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The following presents information as of March 31, 2022 and December 31, 2021 for the Company’s assets and liabilities required to be measured at fair value on a recurring basis, as well as the fair value hierarchy used to determine their fair value.
Accounts Receivable and Payable - The amounts recorded in the accompanying balance sheets approximate fair value because of their short-term nature.
Investments – The Company measures investments, including cost and equity method investments, at fair value on a nonrecurring basis when they are deemed to be other-than-temporarily impaired. The fair values of these investments are determined based on valuation techniques using the best information available, and may include market observable inputs, and discounted cash flow projections. An impairment charge is recorded when the cost of the investment exceeds its fair value and this condition is determined to be other-than-temporary. As of March 31, 2022, the investment in CaféX Communication, Inc., which consisted of the Company’s total $
Debt - The Company’s debt consists primarily of the Company’s Credit Facility, which permits floating-rate borrowings based upon the current Prime Rate or LIBOR plus a credit spread as determined by the Company’s leverage ratio calculation (as defined in the Credit Agreement). As of March 31, 2022 and December 31, 2021, the Company had $
Derivatives - Net derivative assets (liabilities) are measured at fair value on a recurring basis. The portfolio is valued using models based on market observable inputs, including both forward and spot foreign exchange rates, interest rates, implied volatility, and counterparty credit risk, including the ability of each party to execute its obligations under the contract. As of March 31, 2022, credit risk did not materially change the fair value of the Company’s derivative contracts.
The following is a summary of the Company’s fair value measurements for its net derivative assets (liabilities) as of March 31, 2022 and December 31, 2021 (in thousands):
As of March 31, 2022
Fair Value Measurements Using |
| ||||||||||||
| Quoted Prices in |
| Significant |
|
|
|
| ||||||
Active Markets | Other | Significant |
| ||||||||||
for Identical | Observable | Unobservable |
| ||||||||||
Assets | Inputs | Inputs |
| ||||||||||
(Level 1) | (Level 2) | (Level 3) | At Fair Value |
| |||||||||
Cash flow hedges | $ | $ | | $ | $ | | |||||||
Fair value hedges |
|
| |
|
| | |||||||
Total net derivative asset (liability) | $ | $ | | $ | $ | |
15
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
As of December 31, 2021
Fair Value Measurements Using |
| ||||||||||||
| Quoted Prices in |
| Significant |
|
|
|
| ||||||
Active Markets | Other | Significant |
| ||||||||||
for Identical | Observable | Unobservable |
| ||||||||||
Assets | Inputs | Inputs |
| ||||||||||
(Level 1) | (Level 2) | (Level 3) | At Fair Value |
| |||||||||
Cash flow hedges | $ | $ | ( | $ | $ | ( | |||||||
Fair value hedges |
|
| |
|
| | |||||||
Total net derivative asset (liability) | $ | | $ | | $ | | $ | |
The following is a summary of the Company’s fair value measurements as of March 31, 2022 and December 31, 2021 (in thousands):
As of March 31, 2022
Fair Value Measurements Using |
| |||||||||
| Quoted Prices in |
|
| Significant |
| |||||
Active Markets for | Significant Other | Unobservable |
| |||||||
Identical Assets | Observable Inputs | Inputs |
| |||||||
(Level 1) | (Level 2) | (Level 3) |
| |||||||
Assets | ||||||||||
Derivative instruments, net | $ | $ | | $ | ||||||
Total assets | $ | $ | | $ | ||||||
Liabilities | ||||||||||
Deferred compensation plan liability | $ | $ | ( | $ | ||||||
Derivative instruments, net | | |||||||||
Contingent consideration |
|
| |
| | |||||
Total liabilities | $ | | $ | ( | $ | | ||||
Redeemable noncontrolling interest | $ | | $ | | $ | ( |
As of December 31, 2021
Fair Value Measurements Using |
| |||||||||
| Quoted Prices in |
|
| Significant |
| |||||
Active Markets for | Significant Other | Unobservable |
| |||||||
Identical Assets | Observable Inputs | Inputs |
| |||||||
(Level 1) | (Level 2) | (Level 3) |
| |||||||
Assets | ||||||||||
Derivative instruments, net | $ | $ | | $ | ||||||
Total assets | $ | $ | | $ | ||||||
Liabilities | ||||||||||
Deferred compensation plan liability | $ | $ | ( | $ | ||||||
Derivative instruments, net |
|
|
| |||||||
Contingent consideration |
|
|
| ( | ||||||
Total liabilities | $ | $ | ( | $ | ( | |||||
Redeemable noncontrolling interest | $ | $ | $ | ( |
16
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Deferred Compensation Plan — The Company maintains a non-qualified deferred compensation plan structured as a Rabbi trust for certain eligible employees. Participants in the deferred compensation plan select from a menu of phantom investment options for their deferral dollars offered by the Company each year, which are based upon changes in value of complementary, defined market investments. The deferred compensation liability represents the combined values of market investments against which participant accounts are tracked.
Contingent Consideration - The Company recorded contingent consideration related to the acquisitions of VF US and VF ASEAN that closed during 2020. The contingent payable for VF US was calculated using a Monte Carlo simulation including a discount rate of
During the fourth quarter of 2020, the first quarter of 2021, the second quarter of 2021 and the fourth quarter of 2021, the Company recorded fair value adjustments to the contingent consideration associated with the VF US and VF ASEAN acquisitions based on increased actual results and estimates of EBITDA for 2021 which caused the payables to increase. Accordingly, a combined $
A rollforward of the activity in the Company’s fair value of the contingent consideration payable is as follows (in thousands):
|
|
|
| Imputed |
|
| ||||||||||
December 31, | Interest / | March 31, |
| |||||||||||||
2021 | Acquisitions | Payments | Adjustments | 2022 |
| |||||||||||
VF US | $ | | $ | | $ | ( | | $ | | |||||||
VF ASEAN |
| |
| |
| ( |
| |
| | ||||||
Total | $ | | $ | | $ | ( | $ | | $ | |
(8)INCOME TAXES
The Company accounts for income taxes in accordance with the accounting literature for income taxes, which requires recognition of deferred tax assets and liabilities for the expected future income tax consequences of transactions that have been included in the Consolidated Financial Statements. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using tax rates in effect for the year in which the differences are expected to reverse. Quarterly, the Company assesses the likelihood that its net deferred tax assets will be recovered. Based on the weight of all available evidence, both positive and negative, the Company records a valuation allowance against deferred tax assets when it is more-likely-than-not that a future tax benefit will not be realized. The Company’s selection of an accounting policy with respect to both the global intangible low taxed foreign income (“GILTI”) and base erosion and anti-abuse tax (“BEAT”) rules is to compute the related taxes in the period the entity becomes subject to either GILTI or BEAT.
As of March 31, 2022, the Company had $
The effective tax rate for the three months ended March 31, 2022 and 2021 was
17
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
When there is a change in judgment concerning the recovery of deferred tax assets in future periods, a valuation allowance is recorded into earnings during the quarter in which the change in judgment occurred. In the first, third and fourth quarters of 2021, changes to the valuation allowance were recorded in the amount of $
(9)COMMITMENTS AND CONTINGENCIES
Credit Facility
On
On March 25, 2021, the Company entered into a Fifth Amendment to its Credit Agreement and Credit Facility to increase the total commitments by $
The maximum commitment under the Credit Facility is $
18
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Base rate loans bear interest at a rate equal to the greatest of (i) Wells Fargo’s prime rate, (ii) one half of
The Company primarily utilizes its Credit Facility to fund working capital, general operations, dividends and other strategic activities, such as the acquisitions described in Note 2. As of March 31, 2022 and December 31, 2021, the Company had borrowings of $
Letters of Credit
As of March 31, 2022, outstanding letters of credit under the Credit Facility totaled $
Guarantees
Indebtedness under the Credit Agreement is guaranteed by certain of the Company’s present and future domestic subsidiaries.
Legal Proceedings
From time to time, the Company has been involved in legal actions, both as plaintiff and defendant, which arise in the ordinary course of business. The Company accrues for exposures associated with such legal actions to the extent that losses are deemed both probable and reasonably estimable. To the extent specific reserves have not been made for certain legal proceedings, their ultimate outcome, and consequently, an estimate of possible loss, if any, cannot reasonably be determined at this time.
Based on currently available information and advice received from counsel, the Company believes that the disposition or ultimate resolution of any current legal proceedings, except as otherwise specifically reserved for in its financial statements, will not have a material adverse effect on the Company’s financial position, cash flows or results of operations.
(10)DEFERRED REVENUE AND REMAINING PERFORMANCE OBLIGATIONS
Revenue recognized for the three months ended March 31, 2022 from amounts included in deferred revenue as of December 31, 2021 was $
Remaining performance obligations (RPO) represent the amount of contracted future revenue that has not yet been recognized, including both deferred revenue and non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods. The Company’s RPO excludes performance obligations from on-demand arrangements as there are no minimum purchase commitments associated with these arrangements, and certain time and materials contracts that are billed in arrears.
19
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
As of March 31, 2022, the Company’s RPO was $
(11)ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table presents changes in the accumulated balance for each component of Other comprehensive income (loss), including current period other comprehensive income (loss) and reclassifications out of accumulated other comprehensive income (loss) (in thousands):
| Foreign |
|
|
|
| ||||||||
Currency | Derivative |
| |||||||||||
Translation | Valuation, Net | Other, Net |
| ||||||||||
Adjustment | of Tax | of Tax | Totals |
| |||||||||
Accumulated other comprehensive income (loss) at December 31, 2020 | $ | ( |
| $ | |
| $ | ( |
| $ | ( | ||
Other comprehensive income (loss) before reclassifications |
| ( |
| ( |
| |
| ( | |||||
Amounts reclassified from accumulated other comprehensive income (loss) |
| — |
| |
| ( |
| | |||||
Net current period other comprehensive income (loss) |
| ( |
| ( |
| |
| ( | |||||
Accumulated other comprehensive income (loss) at March 31, 2021 | $ | ( |
| $ | |
| $ | ( |
| $ | ( | ||
Accumulated other comprehensive income (loss) at December 31, 2021 | $ | ( |
| $ | ( |
| $ | ( |
| $ | ( | ||
Other comprehensive income (loss) before reclassifications |
| | | |
| | |||||||
Amounts reclassified from accumulated other comprehensive income (loss) |
| — | | ( |
| | |||||||
Net current period other comprehensive income (loss) |
| |
| |
| |
| | |||||
Accumulated other comprehensive income (loss) at March 31, 2022 | $ | ( |
| $ | |
| $ | ( |
| $ | ( |
The following table presents the classification and amount of the reclassifications from Accumulated other comprehensive income (loss) to the Statement of Comprehensive Income (Loss) (in thousands):
For the Three Months Ended | Statement of | ||||||||
March 31, | Comprehensive Income | ||||||||
| 2022 |
| 2021 |
| (Loss) Classification | ||||
Derivative valuation | |||||||||
Gain on foreign currency forward exchange contracts | $ | | $ | |
| Revenue | |||
Tax effect |
| ( |
| ( |
| Provision for income taxes | |||
$ | | $ | |
| Net income (loss) | ||||
Other | |||||||||
Actuarial loss on defined benefit plan | $ | ( | $ | ( |
| Cost of services | |||
Tax effect |
| |
| |
| Provision for income taxes | |||
$ | ( | $ | ( |
| Net income (loss) |
20
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(12)WEIGHTED AVERAGE SHARE COUNTS
The following table sets forth the computation of basic and diluted shares for the periods indicated (in thousands):
Three Months Ended March 31, | |||||
|
| 2022 |
| 2021 | |
Shares used in basic earnings per share calculation |
| |
| | |
Effect of dilutive securities: | |||||
Restricted stock units |
| |
| | |
Performance-based restricted stock units |
| |
| — | |
Total effects of dilutive securities |
| |
| | |
Shares used in dilutive earnings per share calculation |
| |
| |
For the three months ended March 31, 2022 and 2021, there were Restricted Stock Units (“RSUs”) of
(13)EQUITY-BASED COMPENSATION PLANS
All equity-based awards to employees are recognized in the Consolidated Statements of Comprehensive Income (Loss) at the fair value of the award on the grant date. During the three months ended March 31, 2022 and 2021, the Company recognized total equity-based compensation expense of $
Restricted Stock Unit Grants
During the three months ended March 31, 2022 and 2021, the Company granted
Performance Based Restricted Stock Unit Grants
21
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
During 2022, the Company made awards of two different PRSU programs that are subject to service and performance vesting conditions: ordinary course annual PRSUs and one-time stretch financial goals PRSUs.
(14)RELATED PARTY TRANSACTIONS
The Company entered into an agreement under which Avion, LLC (“Avion”) and Airmax LLC (“Airmax”) provide certain aviation flight services as requested by the Company. Such services include the use of an aircraft and flight crew. Kenneth D. Tuchman, Chairman and Chief Executive Officer of the Company, has an indirect 100% beneficial ownership interest in Avion and Airmax. During the three months ended March 31, 2022 and 2021, the Company expensed $
Ms. Regina M. Paolillo, Global Chief Operating Officer of the Company, was a member of the board of directors of Welltok, Inc., a consumer health SaaS company, and partner of the Company in the TTEC Welltok joint venture. During the three months ended March 31, 2022 and 2021, the Company recorded revenue of $
Ms. Regina M. Paolillo is a member of the board of directors of Unisys, a global information technology company. During the three months ended March 31, 2022 and 2021, the Company recorded revenue of $
22
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995, relating to our operations, expected financial position, results of operation, and other business matters that are based on our current expectations, assumptions, and projections with respect to the future, and are not a guarantee of performance. In this report, when we use words such as “may,” “believe,” “plan,” “will,” “anticipate,” “estimate,” “expect,” “intend,” “project,” “would,” “could,” “target,” or similar expressions, or when we discuss our strategy, plans, goals, initiatives, or objectives, we are making forward-looking statements.
We caution you not to rely unduly on any forward-looking statements. Actual results may differ materially from those expressed in the forward-looking statements, and you should review and consider carefully the risks, uncertainties and other factors that affect our business and may cause such differences as outlined in Part II. Item 1A Risk Factors of this report and Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021. Important factors that could cause our actual results to differ materially from those indicated in the forward looking statements include, among others, the risks related to our business operations and strategy, including the risks related to our strategy execution in a competitive market; our ability to innovate and introduce technologies that are sufficiently disruptive to allow us to maintain and grow our market share; risks inherent in the reliability of our information technology systems; risks related to our information technology infrastructure’s cybersecurity in general, and criminal activity such as ransomware, other malware and data exfiltration or destruction in particular, which can impact our ability to consistently deliver uninterrupted service to our clients; our dependence on third parties for our cloud solutions; risks inherent in our transition to a work from home environment; our ability to attract and retain qualified and skilled personnel at a price point that we can afford and our clients are willing to pay; our M&A activity, including our ability to identify, acquire and properly integrate acquired businesses in accordance with our strategy; the risk related to our international operations including risks associated with the Russian invasion of Ukraine in the first quarter of 2022 and impacts it may have on our clients’ European based business and the Company’s business; the risks related to legal and regulatory impact on our operations, including rapidly changing laws that regulate our and our clients’ business, such as data privacy and data protection laws, regulatory changes impacting our healthcare businesses, financial and public sector specific regulations, our ability to comply with these laws timely and cost effectively; and the cost of wage and hour litigation in the United States; the impact of the post COVID-19 pandemic economic recovery and regulatory realities on our business and our clients’ business; and risks inherent in our equity structure including our controlling shareholder risk, and Delaware choice of dispute resolution risks.
Our forward-looking statements speak only as of the date that this report is filed with the United States Securities and Exchange Commission (“SEC”). We undertake no obligation to update them, except as may be required by applicable law. Although we believe that our forward-looking statements are reasonable, they depend on many factors outside of our control and we can provide no assurance that they will prove to be correct.
23
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Executive Summary
TTEC Holdings, Inc. (“TTEC”, “the Company”, “we”, “our” or “us”; pronounced “T-TEC”) is a leading global customer experience as a service (“CXaaS”) partner for many of the world’s most iconic and disruptive brands. TTEC designs, builds, orchestrates, and delivers seamless digitally enabled customer experiences that are designed to increase brand value, customer loyalty, revenue, and profitability through personalized, outcome-based interactions. We help clients improve their customer satisfaction while lowering their total cost to serve by combining innovative digital solutions with service capabilities that deliver a frictionless customer experience (“CX”) across different channels and phases of the customer lifecycle.
The Company operates and reports its financial results of operation through two business segments: TTEC Digital and TTEC Engage.
● | TTEC Digital is one of the largest pure-play CX technology service providers with expertise in CX strategy, digital consulting, and transformation enabled by proprietary CX applications and technology partnerships. TTEC Digital designs, builds, and operates robust digital experiences for clients and their customers through the contextual integration and orchestration of customer relationship management (“CRM”), data, analytics, CXaaS technology, and intelligent automation to ensure high-quality, scalable CX outcomes. |
● | TTEC Engage provides the digitally enabled CX managed services to support our clients’ end-to-end customer interaction delivery at scale. The segment delivers omnichannel customer care, tech support, order fulfillment, customer acquisition, growth, and retention services with industry specialization and distinctive CX capabilities for hypergrowth brands. TTEC Engage also delivers digitally enabled back office and industry specific specialty services including artificial intelligence (“AI”) operations, content moderation, and fraud management services. |
TTEC Digital and TTEC Engage strategically come together under our unified offering, Humanify® CXaaS, which drives measurable customer results for clients through the delivery of personalized, omnichannel experiences. Our Humanify® cloud platform provides a fully integrated ecosystem of CX offerings, including messaging, AI, machine learning, robotic process automation, analytics, cybersecurity, CRM, knowledge management, journey orchestration, and traditional voice solutions. Our end-to-end CXaaS platform differentiates us from competitors by combining design, strategic consulting, technology, data analytics, process optimization, system integration, and operational excellence along with our decades of industry know-how. This unified offering is value-oriented, outcome-based and delivered to large enterprises, governments, and hypergrowth companies on a global scale.
During 2022, the TTEC global operating platform delivered onshore, nearshore, and offshore services in 20 countries on six continents -- the United States, Australia, Belgium, Brazil, Bulgaria, Canada, Costa Rica, Germany, Greece, India, Ireland, Mexico, the Netherlands, New Zealand, the Philippines, Poland, Singapore, South Africa, Thailand, and the United Kingdom with the help of 62,000 consultants, technologists, and CX professionals.
Our revenue for first quarter 2022 was $588.7 million, approximately $113.6 million, or 19% which came from our TTEC Digital segment and $475.1 million, or 81%, which came from our TTEC Engage segment.
To improve our competitive position in a rapidly changing market and stay strategically relevant to our clients, we continue to invest in innovation and service offerings for both mainstream and high growth disruptive businesses, diversifying and strengthening our core customer care services with technology-enabled, outcomes-focused services, data analytics, insights and consulting.
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We also invest to broaden our product and service capabilities, increase our global client base and industry expertise, tailor our geographic footprint to the needs of our clients, and further scale our end-to-end integrated solutions platform. To this end we have been highly acquisitive in the last several years, including in April 2022 the acquisition of certain citizen experience assets of Faneuil, Inc. that include healthcare exchange and transportation services contracts, which will expand our capabilities in the growing public sector market deploying investments to achieve technology-enabled citizen engagement solutions. We also completed an acquisition early in the second quarter of 2021 of a provider of Genesys and Microsoft cloud contact center services, which followed an acquisition in the second half of 2020 of a preferred Amazon Connect cloud contact center service provider.
We have extensive expertise in the automotive, communications, financial services, national/federal and state and local government, healthcare, logistics, media and entertainment, e-tail/retail, technology, travel and transportation industries. We serve more than 750 diverse clients globally, including many of the world’s iconic brands, Fortune 1000 companies, government agencies, and disruptive growth companies.
Cybersecurity Incident
In September 2021, TTEC experienced a ransomware incident that temporarily disrupted the Engage business segment’s client support environment. Certain TTEC systems and data became encrypted and certain TTEC data was exfiltrated or destroyed. TTEC Digital business segment’s information systems and client environment were not involved in the attack. TTEC activated its incident response and business continuity protocols, notified law enforcement, took appropriate measures to restore its systems and was able to restore operations for many impacted clients within hours of the start of the incident, with all client-facing systems returning to operations within five days of the incident.
We exercised reasonable efforts to identify data that may have been exfiltrated. We continue to monitor the situation, and we are not currently aware of evidence that exfiltrated data was publicly released. As of the date of this report, data involved in the incident has been analyzed for impact and notice obligations, and we provided appropriate regulatory and individual notices about the incident and its potential impacts.
With support from outside forensic experts, TTEC completed its investigation of root causes and impacts of the cybersecurity incident and is working to harden the security of its information technology environment and is taking measures to move to a ‘zero trust’ environment to protect its systems and its data.
The Company performed appropriate procedures to validate the accuracy and completeness of information involved in its financial reporting, and we have no indication that the accuracy and completeness of any financial information was impacted as a result of the incident.
The temporary operational disruptions that occurred due to this incident did not have a long-term impact on our results of operations. We made additional investments in the hardening of our cybersecurity environment and the operational governance of our information technology systems during the fourth quarter of 2021 and expect to make further investments in 2022. While the total amount of likely investment has not yet been determined, we anticipate that it will be at least $6 million in 2022 and beyond. The incident and any failure or perceived failure by us to comply with applicable privacy laws in connection with this incident could result in government enforcement actions, regulatory investigations, fines, penalties, and private legal actions, which could impact our results of operations and expenses associated with the incident. In the first quarter of 2022, we have been served with certain lawsuits alleging data privacy failures, which are typical when cybersecurity incidents result in data exfiltration. Other actual and potential consequences of the incident may include negative publicity, loss of client trust, reputational damage, litigation, contractual claims, financial judgement or settlements in excess of insurance, and disputes with insurance carriers concerning coverage. See, Part I, Item 1A Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021.
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COVID-19 Pandemic
Through the period ended March 31, 2022 the COVID-19 pandemic has not had a material adverse impact on our operational or financial results. While we expect this positive trend to continue only some of our COVID-19 specific surge work has transitioned to more traditional business activities for the same clients, and our clients continue to reposition their work in post-pandemic environment, leveraging new ways of working, and evolving the use of technology, in an inflationary economy with considerable labor pressures. These changes bring more opportunities to the Company, while at the same time temporarily or permanently divert certain business volumes. Based on currently available information, we cannot accurately predict the post-pandemic changes to our clients’ businesses and their effect on the magnitude and timing of our clients’ buying decisions. Further, while to date we have been successful in managing service delivery from a highly disbursed employee population working remotely, certain seasonal weather cycles and their potential impacts on power grid, and internet availability for our employees working from home may impact our delivery capability with little notice, thus potentially impacting our results of operations in the future.
Our Integrated Service Offerings and Business Segments
We provide strategic value and differentiation through our two business segments: TTEC Digital and TTEC Engage.
TTEC Digital is one of the largest pure-play CX technology service providers with expertise in CX strategy, digital consulting and transformation enabled by proprietary CX applications and technology partnerships. TTEC Digital designs, builds, and operates robust digital experiences for clients and their customers through the contextual integration and orchestration of CRM, data, analytics, CXaaS technology, and intelligent automation to ensure high-quality, scalable CX outcomes.
● | Technology Services: Our technology services design, integrate, and operate highly scalable, digital omnichannel technology solutions in the cloud, on premise, or hybrid environment, including journey orchestration, automation and AI, knowledge management, and workforce productivity. |
● | Professional Services: Our management consulting practices deliver customer experience strategy, analytics, process optimization, and learning and performance services. |
TTEC Engage provides the digitally enabled CX managed services to support our clients’ end-to-end customer interaction delivery at scale. The segment delivers omnichannel customer care, tech support, order fulfillment, customer acquisition, growth, and retention services with industry specialization and distinctive CX capabilities for hypergrowth brands. TTEC Engage also delivers digitally enabled back office and industry specific specialty services including AI operations, content moderation, and fraud management services.
● | Customer Acquisition, Growth, and Retention Services: Our customer growth and acquisition services optimize the buying journeys for acquiring new customers by leveraging technology and analytics to deliver personal experiences that we believe increase the quantity and quality of leads and customers. |
● | Customer Care, Tech Support, and Order Fulfillment Services: Our customer care, technical support, and order fulfillment services provide turnkey contact center solutions, including digital omnichannel technologies, associate recruiting and training, facilities, and operational expertise to create exceptional customer experiences across all touchpoints. |
● | Digitally Enabled Back Office and Specialty Services: Our digital AI operations, content moderation, and fraud detection and prevention services provide clients with data tagging and annotation capabilities to train and enable AI platforms, community content moderation, and compliance to meet client content standards, and proactive fraud solutions to assist our clients in the detection and prevention of fraud. |
Based on our clients’ preference, we provide our services on an integrated cross-business segment and/or on a discrete basis.
Additional information with respect to our segments and geographic footprint is included in Part I, Item 1. Financial Statements, Note 3 to the Consolidated Financial Statements.
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Financial Highlights
In the first quarter of 2022, our revenue increased $49.5 million, or 9.2%, to $588.7 million over the same period in 2021 including a decrease of $5.2 million, or 1.0%, due to foreign currency fluctuations. The increase in revenue was comprised of a $50.0 million, or 78.6%, increase for TTEC Digital offset by a decrease of $0.5 million, or 0.1%, for TTEC Engage.
Our first quarter 2022 income from operations decreased $25.1 million, or 34.2%, to $48.3 million or 8.2% of revenue, compared to $73.4 million or 13.6% of revenue in the first quarter of 2021. The decrease in operating income is comprised of a number of factors across the segments. The TTEC Digital operating income increased 51.0% due to the acquisition of Avtex and growth in the cloud revenue platform offset by increased amortization of acquisition related intangible assets. The TTEC Engage operating income decreased 39.4% over the same period last year primarily related to the ramp of several new programs, change in revenue mix away from COVID-surge programs, increased sales and marketing expenses and expenses of $3.8 million related to the cybersecurity event from the third quarter of 2021.
Income from operations in the first quarter of 2022 and 2021 included $1.7 million and $3.9 million of restructuring charges and asset impairments, respectively.
Our offshore customer engagement centers spanning six countries serve clients based in the U.S. and in other countries with 22,800 workstations, representing 63% of our global delivery capability. Revenue for our TTEC Engage segment provided from these offshore locations represented 28% of our revenue for the first quarter of 2022, as compared to 29% of our revenue for the corresponding period in 2021.
Our seat utilization is defined as the total number of utilized workstations compared to the total number of available production workstations. As of March 31, 2022, the total production workstations for our TTEC Engage segment was 36,500 and the overall capacity utilization in our centers was 70% versus 64% in the prior year period. While utilization has increased, it continues to be lower than the previous years primarily due to COVID-19 protocols requiring the distancing of employees which has reduced the available seat capacity. Adjusted for social distancing protocols, which reduced the available workstations to approximately 19,800, and accounting for all client paid seats as utilized, whether through actual usage or contractual commitments to hold the seats, current utilization is in excess of 129%.
Post COVID-19 we expect our clients to leverage a more diversified geographic footprint and an increased mix of work from home versus brick and mortar seats. We will continue to refine our site strategy and capacity as we finalize plans with our clients and prospects.
Some of our clients may be subject to regulatory pressures to serve clients onshore. We plan to continue to selectively retain and grow capacity and expand into new offshore markets, while maintaining appropriate capacity onshore. As we grow our offshore delivery capabilities and our exposure to foreign currency fluctuation increases, we will continue to actively manage this risk via a multi-currency hedging program designed to minimize operating margin volatility.
Recently Issued Accounting Pronouncements
Refer to Part I, Item I, Financial Statements, Note 1 to the Consolidated Financial Statements for a discussion of recently adopted and issued accounting pronouncements.
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Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of our Financial Condition and Results of Operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities. We regularly review our estimates and assumptions. These estimates and assumptions, which are based upon historical experience and on various other factors believed to be reasonable under the circumstances, form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Reported amounts and disclosures may have been different had management used different estimates and assumptions or if different conditions had occurred in the periods presented. For further information, please refer to the discussion of all critical accounting policies in Note 1 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021.
Results of Operations
Three months ended March 31, 2022 compared to three months ended March 31, 2021
The tables included in the following sections are presented to facilitate an understanding of Management’s Discussion and Analysis of Financial Condition and Results of Operations and present certain information by segment for the three months ended March 31, 2022 and 2021 (amounts in thousands). All inter-company transactions between the reported segments for the periods presented have been eliminated.
TTEC Digital
Three Months Ended March 31, |
| ||||||||||||
| 2022 |
| 2021 |
| $ Change |
| % Change |
| |||||
Revenue | $ | 113,583 | $ | 63,587 | $ | 49,996 |
| 78.6 | % | ||||
Operating Income |
| 6,347 |
| 4,202 |
| 2,145 |
| 51.0 | % | ||||
Operating Margin |
| 5.6 | % |
| 6.6 | % |
The increase in revenue for the TTEC Digital segment was driven by the acquisition of Avtex and increases in the cloud platform and the systems integration practice.
The operating income increase is primarily attributable to the increase in revenue offset by additional amortization of acquisition related intangible assets. Operating income as a percentage of revenue decreased to 5.6% in the first quarter of 2022 as compared to 6.6% in the prior period. Included in operating income was amortization expense related to acquired intangibles of $6.3 million and $1.2 million for the quarters ended March 31, 2022 and 2021, respectively.
TTEC Engage
Three Months Ended March 31, |
| ||||||||||||
| 2022 |
| 2021 |
| $ Change |
| % Change |
| |||||
Revenue | $ | 475,143 | $ | 475,632 | $ | (489) |
| (0.1) | % | ||||
Operating Income |
| 41,963 |
| 69,222 |
| (27,259) |
| (39.4) | % | ||||
Operating Margin |
| 8.8 | % |
| 14.6 | % |
The slight decrease in revenue for the TTEC Engage segment was due to a net increase of $38.5 million in client programs, offset by a decrease for program completions of $34.1 million and a $4.9 million decrease due to foreign currency fluctuations,.
The operating income decreased primarily due to the ramp of several new programs, change in revenue mix away from COVID-surge programs, increased sales and marketing expenses, and expenses of $3.8 million related to the cybersecurity event from the third quarter of 2021. As a result, operating income as a percentage of revenue decreased to 8.8% in the first quarter of 2022 as compared to 14.6% in the prior period. Included in operating income was amortization expense related to acquired intangibles of $3.2 million and $3.3 million for the quarters ended March 31, 2022 and 2021, respectively.
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Interest Income (Expense)
For the three months ended March 31, 2022 interest income was $0.2 million and $0.2 million in the same period in 2021. Interest expense increased to $3.8 million during 2022 from $1.8 million during 2021 due to higher utilization of the line of credit and higher interest rates.
Other Income (Expense)
For the three months ended March 31, 2022 Other income (expense), net increased to net income of $1.3 million from net expense of $0.8 million during the prior year quarter.
Included in the three months ended March 31, 2021 was a $0.9 million expense related to the fair value adjustment of contingent consideration for two acquisitions (see Part I. Item 1. Financial Statements, Note 7 to the Consolidated Financial Statements).
Income Taxes
The effective tax rate for the three months ended March 31, 2022 was 17.6%. This compares to an effective tax rate of 22.5% for the comparable period of 2021. The effective tax rate for the three months ended March 31, 2022 was influenced by earnings in international jurisdictions currently under an income tax holiday, the distribution of income between the U.S. and international tax jurisdictions and the associated U.S. tax impacts of foreign earnings. Without a $1.5 million benefit related to equity compensation, a $2.5 million benefit related to the amortization of purchased intangibles, a $1.3 million benefit related to changes in valuation allowances, $0.8 million of expense related to other items, a $0.4 million benefit related to restructuring, and a $1.0 million benefit related to the cybersecurity event from the third quarter of 2021,the Company’s normalized tax rate for the first quarter of 2022 was 21.5%.
Liquidity and Capital Resources
Our principal sources of liquidity are our cash generated from operations, our cash and cash equivalents, and borrowings under our Credit Facility. During the three months ended March 31, 2022, we generated positive operating cash flows of $13.7 million. We believe that our cash generated from operations, existing cash and cash equivalents, and available credit will be sufficient to meet expected operating and capital expenditure requirements for the next 12 months, however, if our access to capital is restricted or our borrowing costs increase, our operations and financial condition could be adversely impacted.
We manage a centralized global treasury function in the United States with a focus on safeguarding and optimizing the use of our global cash and cash equivalents. Our cash is held in the U.S. in U.S. dollars, and outside of the U.S. in U.S. dollars and foreign currencies. We expect to use our cash to fund working capital, global operations, dividends, acquisitions, and other strategic activities. While there are no assurances, we believe our global cash is well protected given our cash management practices, banking partners and utilization of diversified bank deposit accounts and other high quality investments.
We have global operations that expose us to foreign currency exchange rate fluctuations that may positively or negatively impact our liquidity. We are also exposed to higher interest rates associated with our variable rate debt. To mitigate these risks, we enter into foreign exchange forward and option contracts through our cash flow hedging program. Please refer to Part I. Item 3. Quantitative and Qualitative Disclosures About Market Risk, Foreign Currency Risk, for further discussion.
In early April 2021, we drew down approximately $500 million of the availability on the Credit Facility in order to provide funding for the acquisition of Avtex Solutions, Holdings LLC.
Although we expect that current cash and cash equivalent balances and cash flows that are generated from operations will be sufficient to meet our domestic and international working capital needs and other capital and liquidity requirements for at least the next 12 months, if our access to capital is restricted or our borrowing costs increase, our operations and financial condition could be adversely impacted.
The following discussion highlights our cash flow activities during the three months ended March 31, 2022 and 2021.
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Cash and Cash Equivalents
We consider all liquid investments purchased within 90 days of their original maturity to be cash equivalents. Our cash and cash equivalents totaled $156.8 million and $158.2 million as of March 31, 2022 and December 31, 2021, respectively. We diversify the holdings of such cash and cash equivalents considering the financial condition and stability of the counterparty institutions.
We reinvest our cash flows to grow our client base, expand our infrastructure, for investment in research and development, for strategic acquisitions and to pay dividends.
Cash Flows from Operating Activities
For the three months ended March 31, 2022 and 2021, net cash flows provided by operating activities was $13.7 million and $69.8 million, respectively. The decrease is primarily due to a $16.4 million increase in net cash income from operations offset by a $39.7 million reduction in net working capital.
Cash Flows from Investing Activities
For the three months ended March 31, 2022 and 2021, net cash flows used in investing activities was $16.7 million and $11.8 million, respectively. The increase was due to a $5.1 million increase in capital expenditures.
Cash Flows from Financing Activities
For the three months ended March 31, 2022 and 2021, net cash flows used in financing activities was $3.8 million and $54.2 million, respectively. The change in net cash flows from 2021 to 2022 was primarily due to a $58.0 million net increase in the line of credit, and a $2.4 million increase in tax payments related to restricted stock units offset by a $9.6 million increase in payments of contingent consideration.
Free Cash Flow
Free cash flow (see “Presentation of Non-GAAP Measurements” below for the definition of free cash flow) decreased for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to an increase in net cash from operations offset by a decrease in working capital and higher capital expenditures. Free cash flow was $(3.0) million and $58.2 million for the three months ended March 31, 2022 and 2021, respectively.
Presentation of Non-GAAP Measurements
Free Cash Flow
Free cash flow is a non-GAAP liquidity measurement. We believe that free cash flow is useful to our investors because it measures, during a given period, the amount of cash generated that is available for debt obligations and investments other than purchases of property, plant and equipment. Free cash flow is not a measure determined by GAAP and should not be considered a substitute for “income from operations,” “net income,” “net cash provided by operating activities,” or any other measure determined in accordance with GAAP. We believe this non-GAAP liquidity measure is useful, in addition to the most directly comparable GAAP measure of “net cash provided by operating activities,” because free cash flow includes investments in operational assets. Free cash flow does not represent residual cash available for discretionary expenditures, since it includes cash required for debt service. Free cash flow also includes cash that may be necessary for acquisitions, investments and other needs that may arise.
The following table reconciles net cash provided by operating activities to free cash flow for our consolidated results (in thousands):
Three Months Ended March 31, | ||||||||
|
| 2022 |
| 2021 | ||||
Net cash provided by operating activities | $ | 13,686 | $ | 69,787 | ||||
Less: Purchases of property, plant and equipment |
| 16,691 |
| 11,565 | ||||
Free cash flow | $ | (3,005) | $ | 58,222 |
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Obligations and Future Capital Requirements
There were no material changes to the Company’s contractual obligations and future capital requirements outside the normal course of business from the date of our 2021 Form 10-K filing on March 3, 2022 through the filing of this report.
Future Capital Requirements
We expect total capital expenditures in 2022 to be between 2.9% and 3.1% of revenue. Approximately 65% of these expected capital expenditures are to support growth in our business and 35% relate to the maintenance for existing assets. The anticipated level of 2022 capital expenditures is primarily driven by new client contracts and the corresponding requirements for additional customer engagement center capacity as well as enhancements to our technological infrastructure.
The amount of capital required over the next 12 months will depend on our levels of investment in infrastructure necessary to maintain, upgrade or replace existing assets. Our working capital and capital expenditure requirements could also increase materially in the event of acquisitions or joint ventures, among other factors. These factors could require that we raise additional capital through future debt or equity financing. We can provide no assurance that we will be able to raise additional capital upon commercially reasonable terms acceptable to us.
Client Concentration
During the three months ended March 31, 2022, one of our clients represented more than 10% of our total revenue. Our five largest clients, collectively, accounted for 37.0% and 41.8% of our consolidated revenue for the three months ended March 31, 2022 and 2021, respectively. We have had long-term relationships with our top five TTEC Engage clients, ranging from 16 to 22 years, with all of these clients having completed multiple contract renewals with us. The relative contribution of any single client to consolidated earnings is not always proportional to the relative revenue contribution on a consolidated basis and varies greatly based upon specific contract terms. In addition, clients may adjust business volumes served by us based on their business requirements. We believe the risk of this concentration is mitigated, in part, by the long-term contracts we have with our largest clients. Although certain client contracts may be terminated for convenience by either party, we believe this risk is mitigated, in part, by the service level disruptions and transition/migration costs that would arise for our clients if they terminated our contract for convenience.
Some contracts with our five largest clients expire between 2022 and 2023, but most of our largest clients have multiple contracts with us with different expiration dates for different lines of work. We have historically renewed most of our contracts with our largest clients, but there can be no assurance that future contracts will be renewed or, if renewed, will be on terms as favorable as the existing contracts.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact our consolidated financial position, consolidated results of operations, or consolidated cash flows due to adverse changes in financial and commodity market prices and rates. Market risk also includes credit and non-performance risk by counterparties to our various financial instruments. We are exposed to market risk due to changes in interest rates and foreign currency exchange rates (as measured against the U.S. dollar); as well as credit risk associated with potential non-performance of our counterparty banks. These exposures are directly related to our normal operating and funding activities. We enter into derivative instruments to manage and reduce the impact of currency exchange rate changes, primarily between the U.S. dollar/Philippine peso, the U.S. dollar/Mexican peso, and the Australian dollar/Philippine peso. We enter into interest rate derivative instruments to reduce our exposure to interest rate fluctuations associated with our variable rate debt. To mitigate against credit and non-performance risk, it is our policy to only enter into derivative contracts and other financial instruments with investment grade counterparty financial institutions and, correspondingly, our derivative valuations reflect the creditworthiness of our counterparties. As of the date of this report, we have not experienced, nor do we anticipate, any issues related to derivative counterparty defaults.
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Interest Rate Risk
We have previously entered into interest rate derivative instruments to reduce our exposure to interest rate fluctuations associated with our variable rate debt. The interest rate on our Credit Agreement is variable based upon the Prime Rate and LIBOR and, therefore, is affected by changes in market interest rates. As of March 31, 2022, we had $803.0 million of outstanding borrowings under the Credit Agreement. Based upon average outstanding borrowings during the three months ended March 31, 2022, interest accrued at a rate of approximately 1.3% per annum, respectively. If the Prime Rate or LIBOR increased by 100 basis points, there would be an annualized $1.0 million of additional interest expense per $100.0 million of outstanding borrowing under the Credit Agreement.
Foreign Currency Risk
Our subsidiaries in the Philippines, Mexico, India, Bulgaria and Poland use the local currency as their functional currency for paying labor and other operating costs. Conversely, revenue for these foreign subsidiaries is derived principally from client contracts that are invoiced and collected in U.S. dollars or other foreign currencies. As a result, we may experience foreign currency gains or losses, which may positively or negatively affect our results of operations attributed to these subsidiaries. For the three months ended March 31, 2022 and 2021, revenue associated with this foreign exchange risk was 18% and 17% of our consolidated revenue, respectively.
In order to mitigate the risk of these non-functional foreign currencies weakening against the functional currencies of the servicing subsidiaries, which thereby decreases the economic benefit of performing work in these countries, we may hedge a portion, though not 100%, of the projected foreign currency exposure related to client programs served from these foreign countries through our cash flow hedging program. While our hedging strategy can protect us from adverse changes in foreign currency rates in the short term, an overall weakening of the non-functional foreign currencies would adversely impact margins in the segments of the servicing subsidiary over the long term.
Cash Flow Hedging Program
To reduce our exposure to foreign currency exchange rate fluctuations associated with forecasted revenue in non-functional currencies, we purchase forward and/or option contracts to acquire the functional currency of the foreign subsidiary at a fixed exchange rate at specific dates in the future. We have designated and account for these derivative instruments as cash flow hedges for forecasted revenue in non-functional currencies.
While we have implemented certain strategies to mitigate risks related to the impact of fluctuations in currency exchange rates, we cannot ensure that we will not recognize gains or losses from international transactions, as this is part of transacting business in an international environment. Not every exposure is or can be hedged and, where hedges are put in place based on expected foreign exchange exposure, they are based on forecasts for which actual results may differ from the original estimate. Failure to successfully hedge or anticipate currency risks properly could adversely affect our consolidated operating results.
Our cash flow hedging instruments as of March 31, 2022 and December 31, 2021 are summarized as follows (in thousands). All hedging instruments are forward contracts, except as noted.
| Local |
|
|
|
|
|
| |||||
Currency | U.S. Dollar | % Maturing | Contracts |
| ||||||||
Notional | Notional | in the next | Maturing |
| ||||||||
As of March 31, 2022 | Amount | Amount | 12 months | Through |
| |||||||
Canadian Dollar |
| 6,000 | $ | 4,675 | 100 | % | December 2022 | |||||
Philippine Peso |
| 7,296,000 |
| 141,365 | (1) | 54.8 | % | December 2024 | ||||
Mexican Peso |
| 1,277,000 |
| 56,308 | 47.6 | % | December 2024 | |||||
$ | 202,348 |
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| Local |
|
|
|
| |||||||
Currency | U.S. Dollar |
| ||||||||||
Notional | Notional |
| ||||||||||
As of December 31, 2021 | Amount | Amount |
| |||||||||
Canadian Dollar |
| 9,000 | $ | 7,022 | ||||||||
Philippine Peso |
| 8,472,000 |
| 164,295 | (1) | |||||||
Mexican Peso |
| 1,422,500 |
| 63,002 | ||||||||
$ | 234,319 |
(1) | Includes contracts to purchase Philippine pesos in exchange for New Zealand dollars and Australian dollars, which are translated into equivalent U.S. dollars on March 31, 2022 and December 31, 2021. |
The fair value of our cash flow hedges as of March 31, 2022 was assets/(liabilities) (in thousands):
Maturing in the | |||||||
| March 31, 2022 |
| Next 12 Months |
| |||
Canadian Dollar | $ | 124 | $ | 124 | |||
Philippine Peso | (2,802) | (1,493) | |||||
Mexican Peso |
| 3,465 |
| 2,109 | |||
$ | 787 | $ | 740 |
Our cash flow hedges are valued using models based on market observable inputs, including both forward and spot foreign exchange rates, implied volatility, and counterparty credit risk. The increase in fair value from December 31, 2021 reflects changes in the currency translation between the U.S. dollar and Mexican Peso and U.S. dollar and Philippine pesos.
We recorded net gains of $0.3 million and $1.4 million for settled cash flow hedge contracts and the related premiums for the three months ended March 31, 2022 and 2021, respectively. These gains were reflected in Revenue in the accompanying Consolidated Statements of Comprehensive Income (Loss). If the exchange rates between our various currency pairs were to increase or decrease by 10% from current period-end levels, we would incur a material gain or loss on the contracts. However, any gain or loss would be mitigated by corresponding increases or decreases in our underlying exposures.
Other than the transactions hedged as discussed above and in Part I, Item 1. Financial Statements, Note 6 to the Consolidated Financial Statements, the majority of the transactions of our U.S. and foreign operations are denominated in their respective local currency. However, transactions are denominated in other currencies from time-to-time. We do not currently engage in hedging activities related to these types of foreign currency risks because we believe them to be insignificant as we endeavor to settle these accounts on a timely basis. For the three months ended March 31, 2022 and 2021, approximately 14% and 14%, respectively, of revenue was derived from contracts denominated in currencies other than the U.S. Dollar. Our results from operations and revenue could be adversely affected if the U.S. Dollar strengthens significantly against foreign currencies.
Fair Value of Debt and Equity Securities
We did not have any investments in marketable debt or equity securities as of March 31, 2022 or December 31, 2021.
ITEM 4. CONTROLS AND PROCEDURES
This report includes the certifications of our Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”) required by Rule 13a-14 of the Securities Exchange Act of 1934 (the “Exchange Act”). See Exhibits 31.1 and 31.2. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.
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Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
We carried out an evaluation under the supervision and with the participation of management, including the CEO and CFO, of the effectiveness of our disclosure controls and procedures, as of March 31, 2022, the end of the period covered by this Form 10-Q. Based on this evaluation, our CEO and CFO have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective at the reasonable assurance level.
Inherent Limitations of Internal Controls
Our management, including the CEO and CFO, believes that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of internal control are met. Further, the design of internal controls must consider the benefits of controls relative to their costs. Inherent limitations within internal controls include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of controls. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. While the objective of the design of any system of controls is to provide reasonable assurance of the effectiveness of controls, such design is also based in part upon certain assumptions about the likelihood of future events, and such assumptions, while reasonable, may not take into account all potential future conditions. Thus, even effective internal control over financial reporting can only provide reasonable assurance of achieving their objectives. Therefore, because of the inherent limitations in cost effective internal controls, misstatements due to error or fraud may occur and may not be prevented or detected.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Part I, Item 1. Financial Statements, Note 10 to the Consolidated Financial Statements of this Form 10-Q is hereby incorporated by reference.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A. Risk Factors in our 2021 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. In addition to the risk factors identified in our 2021 Annual Report, please consider the following additional Risk Factors.
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Our operations in Europe, especially in former Eastern Bloc countries, may be impacted by the Russia-Ukraine conflict.
In February 2022, the Russian Federation invaded Ukraine, resulting in military actions, economic disruption in Europe, broad sanctions against Russia and its political and economic elite, and the mass exodus of refugees to Poland and other neighboring countries (the “Conflict”). More recently, the Russian Federation made open threats against various countries that support Ukraine in the Conflict and against European countries interested in joining the North Atlantic Treaty Organization (“NATO”). Although the specific nature of these threats is not clear, experts believe that Russia may use traditional warfare, cyber-attacks, or manipulation of supplies of energy to Europe to discourage anti-Russian sentiment and actions. Further, on April 27, 2022, Russia took an unprecedented step of breaching its gas supply contracts with Poland and Bulgaria where TTEC has operations. Lack of access to the Russian gas supply in Poland and Bulgaria may impact business operations in these countries and employees’ ability to deliver services. Although the full potential impact on TTEC’s or its clients’ European operations in general and on TTEC’s operations in Poland and Bulgaria, in particular, from the Russian aggression in Europe is not yet clear, if we are unable to continue delivering services from our current locations in Europe or if our clients reduce our service volumes because of the Conflict, our growth strategy, revenue generation and financial results of operations in Europe could be materially impacted.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
In November 2001, our Board of Directors (“Board”) authorized a stock repurchase program with the objective of increasing stockholder returns. The Board periodically authorizes additional increases to the program. The most recent Board authorization to purchase additional common stock occurred in February 2017, whereby the Board increased the program allowance by $25.0 million. Since inception of the program through March 31, 2022, the Board has authorized the repurchase of shares up to a total value of $762.3 million, of which we have purchased 46.1 million shares on the open market for $735.8 million. The Company did not repurchase any of its shares during the three months ended March 31, 2022. As of March 31, 2022 the remaining amount authorized for repurchases under the program was approximately $26.6 million. The stock repurchase program does not have an expiration date.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
Exhibit | Incorporated Herein by Reference | |||||||
No. |
| Exhibit Description | Form | Exhibit | Filing Date | |||
10.35* | ||||||||
10.84* | Employment Agreement between Michelle Swanback and TTEC Services Corporation effective May 2, 2022 | |||||||
31.1* | ||||||||
31.2* | ||||||||
32.1* | ||||||||
32.2* | ||||||||
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101.INS | XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |||||||
101.SCH | XBRL Taxonomy Extension Schema | |||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase | |||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase | |||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | |||||||
104 | The cover page from TTEC Holdings, Inc’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline XBRL | |||||||
* | Filed or furnished herewith. | |||||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TTEC HOLDINGS, INC. | |||
(Registrant) | |||
Date: May 4, 2022 | By: | /s/ Kenneth D. Tuchman | |
Kenneth D. Tuchman | |||
Chairman and Chief Executive Officer | |||
Date: May 4, 2022 | By: | /s/ Dustin J. Semach | |
Dustin J. Semach | |||
Chief Financial Officer |
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EXHIBIT 10.35
TTEC HOLDINGS, INC.
Value Creation Program
Performance Restricted Stock Unit Agreement
This Value Creation Program Performance Restricted Stock Unit Agreement (this "Agreement") is made to be effective as of March 15, 2022 (the " Grant Date") by and between TTEC Holdings, Inc., a Delaware corporation (the "Company" or “TTEC”) and _______________ (the "Grantee").
This Agreement is governed by the terms of the TTEC Holdings, Inc. 2020 Equity Incentive Plan (the ‘Plan’), pursuant to which the Company may grant equity awards to eligible employees, directors and consultants of the Company and its affiliates.
Capitalized terms that are used but not defined in this Agreement have the meaning ascribed to them in the Plan. The terms and provisions of the Plan as they may be amended from time to time are incorporated into this Agreement by reference. In the event of a conflict between any term or provision contained in this Agreement and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
The parties agree to be legally bound by this Agreement, and in exchange for sufficient consideration, the adequacy of which is not in question, agree as follows:
The VC-PRSU one-time awards are separate and distinct from the Grantee’s annual equity compensation incentive opportunity. Grantee’s annual equity incentives are not subject to this Agreement and those awards, if any, are made pursuant to TTEC’s annual incentive program and based on performance for a specific fiscal year.
2. | VC-PRSU Grant Based on Performance During THE Measurement Period. |
2.1 Pursuant to the Plan and subject to the provisions of this Agreement, the Company hereby irrevocably provides to the Grantee a performance based restricted stock unit award covering a target of ____________ Shares of Company stock (the “VC-PRSU Grant”) that will vest as further described below based on Performance Goals for ____________ Operating Group during the Measurement Period (as these terms are defined in Section 3.3 below).
The number of Shares of Company stock that the Grantee may earn under this VC-PRSU Award will be determined based on the actual Performance (Revenue and Adjusted EBITDA) Goals for the relevant Operating Group as set forth in the Appendix A - Performance Goals for the Measurement Period.
2.2. Employment Status At the Time of Vesting. Except as otherwise provided in Section 2.4 (termination without cause) and 6.12 (change in circumstances), the Grantee’s entitlement to any VC-PRSUs under this VC-PRSU Award is conditioned on the Grantee’s continuing employment in good standing with the Company, as of the Vesting Date specified in Section 4 of this Agreement.”
1
2.3. Operating Group Change/Payout Proration. If prior to the end of the Measurement Period, the Grantee’s primary affiliation within TTEC business changes from the Grantee’s Operating Group listed in Section 2.1 to another Operating Group, the Award payout, at vesting, will be prorated based on the time spent by the Grantee in each Operating Group, measured by the respective Operating Group’s performance against the relevant Operating Segment’s Performance Goals.
2.4Termination Without Cause/Payout Proration. If the Grantee’s employment with the Company is terminated by the Company without Cause as that term is defined in Section 3.3 of this Agreement, the number of vested shares that the Grantee would earn under this VC-PRSU Award would be as follows:
(i) If the termination occurs during the 2022 or 2023 calendar year, there shall be no vesting of VC-PRSU Award and no payout under this Grant, regardless of the Grantee’s Operating Group’s performance during the Measurement Period;
(ii) If the termination occurs during the 2024 calendar year, based on the actual performance of the Grantee’s Operating Group during the Measurement Period, the Grantee shall receive up 33.33% (one third) of the payout that the Grantee would have received, if the Grantee was not terminated without Cause and was still employed by the Company on the Vesting Date; provided, however, that the actual payout that the Grantee would receive, would be prorated based on the number of days that the Grantee was employed by the Company during the period between January 1, 2022 and December 31, 2025 (the end of the Measurement Period)1;
(iii) If the termination occurs during the 2025 calendar year or thereafter at any time through the Vesting Date, based on the performance of the Grantee’s Operating Group during the Measurement Period, the Grantee shall receive up to 75% (three quarters) of the payout that the Grantee would have received, if the Grantee was not terminated without Cause and was still employed by the Company on the Vesting Date; provided, however, that the actual payout that the Grantee would receive, would be prorated based on the number of days that the Grantee was employed by the Company during the period between January 1, 2022 and December 31, 2025 (the end of the Measurement Period)2.
(iv) For the avoidance of doubt, ‘constructive termination’ or termination for a ‘good reason’ as these terms are sometimes used to describe voluntary termination of employment shall not constitute “termination without Cause” for purposes of this Agreement, unless expressly provided elsewhere in an agreement specific to the Grantee.
1 For illustration purposes only, if Grantee is terminated by the Company without Cause on July 1, 2024, the payout that the Grantee would receive, pursuant to this Section 2.4(ii), would be 20.8% of the actual payout the Grantee would have received if not terminated (.3333 x Grantee’s payout, if the Grantee was employed by the Company on the Vesting Date times .624 (912 days divided by 1,461 days, where 1,461 is the total number of days in the 48 months and 912 is the number of days in 30 months that the Grantee actually worked for the business between January 1, 2022 and the termination date.)
2 For illustration purposes only, if Grantee is terminated by the Company without Cause on July 1, 2025, the payout that the Grantee would receive, pursuant to this Section 2.4(iii), would be 65.6% of the actual payout the Grantee would have received if not terminated (.75 x Grantee’s payout, if the Grantee was employed by the Company on the Vesting Date times .875 (1,278 days divided by 1,461 days, where 1,461 is the total number of days in the 48 months and 1,278 is the number of days in 42 months that the Grantee actually worked for the business between January 1, 2022 and July 1, 2025).
3. | VC-PRSU Award Earning Opportunity. |
VC-PRSU Award/Payout | Threshold 0% | Tier I 50% | Tier II 75% | Tier III (Target) 100% | Tier IV (Max) 200% |
Revenue Goal Achievement | 0 Shares | [•] Shares | [•] Shares | [•] Shares | [•] Shares |
Adjusted EBITDA Goal Achievement | 0 Shares | [•] Shares | [•] Shares | [•] Shares | [•] Shares |
3.2 Payout Calculations. The VC-PRSU opportunity will max-out at 200% of the VC-PRSU Award regardless of the actual Revenue and/or Adjusted EBITDA earned by Grantee’s relevant TTEC Operating Group during the Measurement Period. If the Revenue and/or Adjusted EBITDA for the Measurement Period fall below Threshold, as stated above, the portion of the Award attributable to the relevant performance metric that is below the Threshold will not be paid.
When the Revenue or Adjusted EBITDA for the Measurement Period falls between designated payout tiers, the actual VC-PRSUs paid for that period will be prorated accordingly, on a straight-line basis, with the same proration rules applying for all employees who are subject to this VC-PRSU opportunity.
“TTEC Digital” for purpose of this VC-PRSU Award shall mean the TTEC Digital business segment for which the Company reports financial results, or business segment successor to TTEC Digital.
“TTEC Engage” for purposes of this VC-PRSU Award shall mean the TTEC Engage business segment for which the Company reports financial results, or business segment successor to TTEC Engage.
“TTEC EMEA” for purposes of this VC-PRSU Award shall mean the “TTEC Europe Middle East and Africa” operating group.
“TTEC Enterprise Services” for purposes of this VC-PRSU Award shall mean the TTEC Enterprise Services operating group.
“Operating Group” for purposes of this VC-PRSU Award shall mean the relevant performance group (e.g., TTEC Digital, TTEC Engage, TTEC EMEA or TTEC Enterprise Services, as the case may be), based on which the VC-PRSU Award is granted under this Agreement as provided in Section 2 and Appendix A.
“Grantee’s Operating Group” for purposes of this VC-PRSU Award shall mean the operating group stated in the opening paragraph to this Agreement, the performance of which during the Measurement Period would determine the size of the actual VC-PRSU payout for the Grantee at the time of vesting.
“Measurement Period” for purposes of this VC-PRSU Award shall be the Company’s 2025 fiscal year. For avoidance of doubt, the measurement period for this Award is not a multi-year period but is the Company’s performance in a single fiscal year.
“Performance Goals” for purposes of this VC-PRSU Award calculation are performance metrics for the relevant Operating Group as reflected in Appendix A – Performance Goals to this Agreement.
“Revenue” for purposes of this VC-PRSU Award calculations will be equal to the relevant Operating Group GAAP revenue for the Measurement Period, as publicly disclosed in TTEC’s earnings release for that fiscal year (or if not so reported, as derived from the Company’s audited financial statements for that period) and adjusted, up or down, at the discretion of TTEC Compensation Committee of the Board for material Unbudgeted and Unanticipated Items.
3
“Adjusted EBITDA” for purposes of this VC-PRSU Award calculations will be equal to the relevant Operating Group GAAP operating income for the Measurement Period, as publicly disclosed in TTEC’s earnings release for that fiscal year (or if not so reported, as derived from the Company’s audited financial statements for that period), plus costs associated with restructure, impairment, depreciation, amortization and stock-based compensation and attributed to the relevant Operating Group, adjusted, up or down, at the discretion of the Compensation Committee of the Board for material Unbudgeted and Unanticipated Items.
“Unbudgeted and Unanticipated Items” may include among others, as determined by the Compensation Committee of the Board, investments, divestitures, costs associated with natural disasters, storms or pandemics, foreign exchange variations, capital markets transaction costs, other material transaction and litigation costs that could not have been reasonably anticipated in the ordinary course of business.
Revenue and Adjusted EBITDA associated with acquisitions closed between January 1, 2022 and the end of the Measurement Period will be included for purposes of the Performance Goals metric’s calculation as follows:
(i) | For Digital Operating Group: up to $160 million of ‘acquired’ Revenue and up to $40 million in ‘acquired’ Adjusted EBITDA; |
(ii) | For Engage Operating Group: up to $310 million of ‘acquired’ Revenue and up to $48 million in ‘acquired’ Adjusted EBITDA; |
(iii) | For EMEA Operating Group: up to $29 million of ‘acquired’ Revenue and up to $11 million in ‘acquired’ Adjusted EBITDA |
(iv) | For Enterprise Services Operating Group: the vesting of the VC-PRSU’s is based 50% on Digital Operating Group’s Performance Goal (30% of Digital’s Revenue and 20% of Digital’s Adjusted EBITDA) and 50% of the Engage Operating Group’s Performance Goal (30% of Engage’s Revenue and 20% of Engage’s Adjusted EBITDA); and ‘acquired’ Revenue and ‘acquired’ EBITDA to be included in respective Performance Goals’ metrics will be consistent with each Operating Group |
(v) | For each acquisition, the “acquired” revenue and “acquired” adjusted EBITDA to be included in the Performance Goals metrics will be based on the acquired business’s revenue and adjusted EBITDA performance during the last twelve months (LTM) period as of month’s end when the acquisition closed, but in the aggregate for all acquisitions for a relevant Operating Group not to exceed the above state caps. |
“Threshold” for purposes of this Award is the minimum level of Revenue or Adjusted EBITDA in the Measurement Period, as applicable, below which the VC-PRSU incentive does not pay.
“Cause” for purposes of a prorated payout of this Award if a Grantee is terminated without Cause, the term shall have the following meaning:
(i) | Fraud, theft, embezzlement (or attempted fraud, theft, embezzlement), dishonest acts or illegal conduct; |
(ii) | Other similar material acts of willful misconduct on the part of the Grantee resulting in damage to the Company, including without limitation a material breach by the Grantee of the requirements of TTEC Ethics Code; |
(iii) | NA (this section is intentionally left blank); |
(iv) | A material breach by the Grantee of this Agreement; |
(v) | Use of any controlled substance or alcohol while performing duties of employment, except as part of a Company-sponsored event in connection with a business-related social engagement such as |
a trade conference or customer entertainment, but only in moderation and in a professional manner that reflects positively on the Company; with visible inebriation at a business-related social engagement constituting a cause for immediate termination; |
(vi) | Breach of a fiduciary duty that results in an adverse impact to the Company or in personal profit to the Grantee (as determined by the Company based on its conflict of interest policies outlined in the TTEC Ethics Code); |
(vii) | Use of trade secrets or confidential information of the Company or any of its subsidiaries, other than in pursuit of TTEC’s business; |
(viii) Aiding a competitor of TTEC;
(ix) Failure by the Grantee in the performance of the duties that results in material adverse effect on the Company.
If this definition of the “Cause” is different from a definition of the “Cause” that the Grantee may have in an employment agreement, the definition tailored to the Grantee and the Grantee’s role in the employment agreement shall govern the payout provisions of this Grant.
3.4No Catch-Up Rights. The purpose of the VC-PRSU Award is to reward the Grantee for driving exceptional performance over the entire Measurement Period, as reflected in the performance metrics of relevant Operating Group. Therefore, there are no catch-up rights with respect to the VC-PRSU Award.
4. | Vesting Date . The VC-PRSU Award shall vest in March 2026, after the Company releases to the public its earnings for the Measurement Period, with the exact vesting date to be selected by the Compensation Committee of the Board (the “Vesting Date”). The Vesting Date shall be the same for all VC-PRSU participants. |
5. Non-competition; Non-solicitation.
5.1 Grantee recognizes that the primary purpose of this VC-PRSU Award is to reward the Grantee’s performance and to ensure Employee’s loyalty to TTEC, and that this VC-PRSU Award would not be made to Grantee in the absence of the promises below. In consideration of the VC-PRSU Award, the Grantee agrees and covenants during the term of his/her affiliation with TTEC (employment or otherwise) and for twelve (12) months thereafter not to:
(i) Non-Compete Undertaking. Work or otherwise contribute his/her knowledge, directly or indirectly, in whole or in part, as an employee, officer, owner, manager, advisor, consultant, agent, partner, director, significant shareholder (i.e., a shareholder holding more than 5% of outstanding equity in any such entity), volunteer, intern or in any other similar capacity to a business/company engaged in the same or substantially similar business as the Company, its subsidiaries and affiliates, including the delivery of CX (customer experience) technology and orchestration services through public or proprietary cloud-based CXaaS (Customer Experience as a Service) platform; designing, building, engineering and operating omnichannel contact center technology, conversational messaging, CRM, CX automation (AI / ML and RPA), and CX analytics solutions; and digital customer engagement, customer acquisition & growth, content moderation, fraud prevention, and data annotation solutions (collectively, “TTEC Business”).
The Non-Compete Undertaking shall apply only in the territory where the Company actually benefits and where it may reasonably expect to benefit from the Grantee’s services, but only with respect to that aspect of TTEC Business that is substantially similar to the business that the Grantee primarily contributes to while employed by TTEC.
(ii) Employees Non-Solicitation Undertaking. Solicit, hire, recruit, attempt to hire or recruit, or induce the termination of employment, directly or indirectly, of any then current employee of the Company or its subsidiaries and affiliates or anyone who was an employee of the Company within the previous six (6) month period; and
(iii) Client Non-Solicitation Undertaking. Solicit or interfere with business relationships between the Company and its current or prospective (actively pursued) clients of the Company or any of its subsidiaries and affiliates for purposes of offering or accepting goods or services similar to or competitive with those offered by the Company or any of its subsidiaries and affiliates.
5.2 If the Grantee breaches any of the covenants and undertakings set forth in this Section 5:
(i) | All unvested VC-PRSU Awards shall be immediately forfeited and cancelled; |
(ii) | The value of any vested VC-PRSU Awards that have vested must be paid by Grantee back to TTEC since the primary purpose of the VC-PRSU Award will not have been realized by TTEC; |
(iii) | He/she (but not to the exclusion of those who aid him/her in such breach) shall be liable for all other damages resulting from such breach; and |
(iv) The Grantee hereby consents and agrees that the Company shall be entitled to seek, in addition to other available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, without the necessity of showing any actual damages. The aforementioned equitable relief shall be in addition to, not in lieu of, legal remedies, monetary damages or other available forms of relief at law or specified in this Agreement.
5.3 Acknowledgements.
(i) Grantee acknowledges that the non-competition and non-solicitation provisions above are fair and reasonable with respect to their scope and duration, given the Grantee’s position with TTEC and the impact such activities would have on the TTEC Business.
(ii) Grantee further acknowledges that the geographic restriction on competition included in this Section 5 is fair and reasonable, given the nature and geographic scope of the TTEC Business, the investment of capital and resources by Company to develop its business operations, and the nature of Grantee position with TTEC.
(iii) Grantee also acknowledges that while employed or otherwise affiliated with TTEC, Grantee has access to proprietary and unique trade secret information that would be valuable or useful to Company’s competitors and that Grantee has access to Company’s valuable customer relationships and thus acknowledges that the restrictions on Grantee’s future employment and business activities in TTEC’s industry as set forth in this Section 5 are fair and reasonable.
(iv) Grantee acknowledges and is prepared for the possibility that Grantee’s standard of living may be reduced during the non-competition and/or non-solicitation period and assumes and accepts any risk associated with that possibility, and further acknowledges that any such drop in Grantee’s standard of living does not constitute undue hardship.
6. | Miscellaneous Provisions. |
6.1 Consideration. The Company is providing this VC-PRSU Award opportunity in consideration of the services that the Grantee is providing to the Company through the Vesting Date, and other mutual covenants provided in this Agreement.
6.2 Separation of Services. Pursuant to the delegations of authority that the Compensation Committee of the Board has made with respect to the administration of the Plan, and subject to the provisions of Section 6.11 (administration), the Global Chief Operating Officer and Chief People Officer of the Company, in their discretion but acting in concert, shall have the authority to determine the effect of all matters and questions with respect to the Grantee’s termination of affiliation with the Company and whether continuous services are being provided as these matters relate to the VC-PRSU Award payout or vesting, including, without limitation, the question of whether a termination of service has occurred, whether a leave of absence or disability constitute a termination of service and other similar questions.
If the Grantee is a resident of one of the countries listed on Appendix D to this Agreement, then the country specific provisions found in Appendix D are incorporated into this Agreement by reference.
Grantee understands that Data may be transferred to a stock plan service provider (“Service Provider”) that may be selected by TTEC, which is assisting TTEC with the implementation, administration and management of the Plan. Grantee authorizes TTEC and the Service Provider and any other possible recipients which may assist TTEC (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing his or her participation in the Plan. Grantee understands that Data will be held only as long as is necessary to implement, administer and manage Grantee’s participation in the Plan.
Further, Grantee understands that he or she is providing the consents herein on a voluntary basis. If Grantee does not consent, or if Grantee later seeks to revoke his or her consent, his or her employment status or service and career with the employer will not be adversely affected; the only adverse consequence of refusing or withdrawing Grantee’s consent is that TTEC would not be able to grant Grantee VC-PRSUs or other equity awards or administer or maintain such awards. Therefore, Grantee understands that refusing or withdrawing his/her consent may affect Grantee’s ability to participate in the Plan. For more information on the consequences of Grantee’s refusal to consent or withdrawal of consent, Grantee understands that he/she may contact his/her human capital representative.
(i) | Governing Law. This Agreement will be construed and interpreted in accordance with the laws of the State of Colorado without regard to conflict of law principles. |
(ii) | Disputes. The parties agree that any action arising from or relating in any way to this Agreement or the Plan shall be resolved and tried in the United States federal or state courts situated in Denver, Colorado. Grantee and Company each expressly consents to the personal jurisdiction of the state and United States federal courts located in Denver, Colorado to adjudicate any dispute between Grantee and Employee arising out of or related to this Agreement, regardless of where Grantee executes this Agreement or performs work for the Company. Grantee and Company consent to the exclusive jurisdiction and venue of the state and United States federal courts located in Denver, Colorado to adjudicate any such disputes, and Grantee and Company waive any defenses regarding the propriety of venue, including any argument that venue should not be in Denver, Colorado due to the inconvenience of the forum to the parties or witnesses. |
Entering into this Agreement is not a condition of Grantee’s employment. If Grantee does not wish to consent to having disputes regarding this Agreement litigated in Colorado, Grantee can reject this Agreement by not signing this agreement. Doing so, however, would mean that none of the terms of this Agreement will apply, including the grant of VC-PRSUs offered to Grantee in connection with this Agreement.
(iii) | In this regard, the Grantee acknowledges and admits to all or a combination of several following substantial contacts with the State of Colorado: (A) Grantee is employed, provides services for or otherwise is affiliated with a legal entity headquartered in the State of Colorado, U.S.A.; (B) Grantee receives compensation in a form of checks or wire transfers that are drawn either directly or indirectly, from bank accounts in Colorado; (C) Grantee regularly interacts with, contacts and is contacted by other TTEC employees and executives in Colorado; (D) Grantee either travels to or attends business meetings in Colorado; and (E) Grantee receives substantial compensation and benefits as a result of TTEC being a corporation headquartered in and subject to the laws of Colorado. Based on these and other contacts, the Grantee acknowledges that he/she could reasonably be subject to the laws of Colorado. |
(iv) | Attorneys’ fees. The party that substantially prevails in any action to enforce any provision of this Agreement shall recover all reasonable costs and attorneys' fees incurred in connection with the action. |
(iv) | Discretionary Nature of All Future Awards. This VC-PRSU Award is a discretionary one-time award and it does not create any contractual, statutory or other right to receive future VC-PRSU Awards, or benefits in lieu of VC-PRSUs, even if similar or other equity awards have been granted in the past. Future equity awards, if any, will be at the sole discretion of the Company. |
(v) | No Impact on Other Benefits. The value of the Grantee’s awards hereunder is not part of his/her normal or expected compensation for purposes of calculating any severance, retirement, welfare, insurance or similar employee benefit. |
6.12 Changes in Circumstances Including Change in Control.
(i) | If prior to the end of the Measurement Period the Company engages in a capital markets transaction, restructuring, material accounting or reporting change affecting one or more operating segments or material geographic regions of the Company, business combination, recapitalization, stock split, extraordinary special stock dividend, consolidation, rights offering, spin-off, or the like (“Material Transaction”) the result of which would make fair and equitable measurement of the Performance Goals over the Measurement Period no longer practical or if the Material Transaction constitutes a “Change in Control” event, as that term is defined in the Plan and Appendix C to this Agreement, the Compensation Committee of the Board shall have the discretionary authority to reconstitute and shall reconstitute this VC-PRSU Award to adjust and modify Performance Goals and payout targets of this Award to preserve the intended incentive opportunities under this VC-PRSU Award. |
(ii) This VC-PRSU Award is subject to the Change of Control rights and entitlements as further referenced in Appendix C to this Agreement and incorporated into the Agreement by reference.
6.13 Confidentiality. Unless required by law, Grantee agrees not to disclose, directly or indirectly, to any other employee, director or consultant of TTEC or an affiliate and to keep confidential all information related to any Awards granted to Grantee, pursuant to the Plan, including the amount of any such Award and its vesting schedule. Failure to honor the Confidentiality provisions of this Section 6.13 shall constitute the breach of this Agreement and all VC-PRSUs granted hereunder shall be forfeited as a consequence of such breach.
6.14Severability and Entirety. The invalidity or unenforceability of any provision of the Plan or this Agreement shall not affect the validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.
The Agreement (including the Plan) constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes all prior and contemporaneous agreements, oral or written, between the Company and Grantee relating to Grantee’s participation in the Value Creation Program, or entitlement to VC-PRSUs or similar benefits under the Plan.
6.15 IRS Section 409A. This Agreement shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from, or complies with, the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the Internal Revenue Service guidance and Treasury Regulations thereunder (collectively, “Section 409A”).
6.16 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.
6.17 Acceptance. The Grantee hereby acknowledges receipt of a copy of the Plan and this Agreement. The Grantee has read and understands its terms and provisions and accepts the VC-PRSU Award subject to the terms and conditions of the Plan and this Agreement. The Grantee acknowledges that there may be adverse tax consequences upon the grant or vesting of the VC- PRSUs or disposition of the underlying shares and that the Grantee has been advised to consult a tax advisor prior to such grant, vesting or disposition.
The parties have executed this Agreement as of the date first above written.
TTEC Holdings, Inc.Grantee:
________________________________________________
Regina Paolillo,[Grantee’s Name ]
Global Chief Operating Officer
Date:____________________Date: ____________________
Appendix A -- Performance Goals
Performance Goals. The following tables outline the performance goal and payout opportunity tiers for the VC-PRSU Award based on specific Operating Group relevant to the Grantee as identified in the Agreement.
TTEC Digital Operating Group
Weighting of Performance Goals. The VC-PRSU payout opportunity for TTEC Digital Operating Group will be calculated as follows:
● | 60% based on the Revenue goal achievement, and |
● | 40% based on the Adjusted EBITDA goal achievement, |
each measured as of the end of the Measurement Period (all terms defined in Section 3.3 of the Agreement).
| | 2025 Performance (amounts in millions) | | |
| 2021 Actuals | Revenue | % of Change Based on 2021 Results | Payout % |
TTEC Digital Revenue | $414.4 | $805.0 | 18.1% | Threshold – 0% |
18.1% | CAGR | |||
$840.0 | 19.3% | Tier I – 50% | ||
19.3% | CAGR | |||
$872.0 | 20.4% | Tier II – 75% | ||
20.4% | CAGR | |||
$907.0 | 21.6% | Tier III – 100% | ||
21.6% | CAGR | |||
$938.0 | 22.7% | Tier IV (Max) – 200% | ||
22.7% | CAGR |
| | 2025 Performance (amounts in millions) | | |
| 2021 Actuals | Adjusted EBITDA | % of Change Based on 2021 Results | Payout % |
TTEC Digital Adjusted EBITDA | $69.4 | <$140.0 | 19.2% | Threshold – 0% |
19.2% | CAGR | |||
$154.0 | 22.1% | Tier I – 50% | ||
22.1% | CAGR | |||
$169.6 | 25.0% | Tier II – 75% | ||
25.0% | CAGR | |||
$188.0 | 28.3% | Tier III – 100% | ||
28.3% | CAGR | |||
$206.0 | 31.3% | Tier IV (Max) – 200% | ||
31.3% | CAGR |
11
TTEC Engage Operating Group
Weighting of Performance Goals. The VC-PRSU payout opportunity for TTEC Engage Operating Group will be calculated as follows:
● | 60% based on the Revenue goal achievement, and |
● | 40% based on the Adjusted EBITDA goal achievement, |
each measured as of the end of the Measurement Period (all terms defined in Section 3.3 of the Agreement).
| | 2025 Performance (amounts in millions) | | |
| 2021 Actuals | Revenue | % of Change Based on 2021 Results | Payout % |
TTEC Engage Revenue | $1,858.1 | $2,624.0 | 9.0% | Threshold – 0% |
9.0% | CAGR | |||
$2,714.0 | 9.9% | Tier I – 50% | ||
9.9% | CAGR | |||
$2,810.0 | 10.9% | Tier II – 75% | ||
10.9% | CAGR | |||
$2,908.0 | 11.8% | Tier III – 100% | ||
11.8% | CAGR | |||
$2,999.5 | 12.7% | Tier IV (Max) – 200% | ||
12.7% | CAGR |
| | 2025 Performance (amounts in millions) | | |
| 2021 Actuals | Adjusted EBITDA | % of Change Based on 2021 Results | Payout % |
TTEC Engage Adjusted EBITDA | $278.4 | <$400.0 | 9.5% | Threshold – 0% |
9.5% | CAGR | |||
$416.0 | 10.6% | Tier I – 50% | ||
10.6% | CAGR | |||
$437.4 | 12.0% | Tier II – 75% | ||
12.0% | CAGR | |||
$457.0 | 13.2% | Tier III – 100% | ||
13.2% | CAGR | |||
$480.0 | 14.6% | Tier IV (Max) – 200% | ||
14.6% | CAGR |
Enterprise Services Operating Group
Weighting of Performance Goals. The VC-PRSU payout opportunity will be calculated as follows:
● | 30% based on the Revenue goal achievement for TTEC Digital, |
● | 20% based on the Adjusted EBITDA goal achievement for TTEC Digital, |
● | 30% based on Revenue goal achievement for TTEC Engage, and |
● | 20% based on the Adjusted EBITDA goal achievement for TTEC Engage, |
each measured as of the end of the Measurement Period (all terms defined in Section 3.3 of the Agreement).
TTEC EMEA Operating Group (in USD)
Weighting of Performance Goals. The VC-PRSU payout opportunity for TTEC EMEA Operating Group will be calculated as follows:
● | 60% based on the Revenue goal achievement, and |
● | 40% based on the Adjusted EBITDA goal achievement, |
each measured as of the end of the Measurement Period (all terms defined in Section 3.3 of the Agreement).
| | 2025 Performance (amounts in millions) | | |
| 2021 Actuals | Revenue | % of Change Based on 2021 Results | Payout % |
TTEC EMEA Revenue | $125.0 | $340.5 | 28.5% | Threshold – 0% |
28.5% | CAGR | |||
$352.9 | 29.6% | Tier I – 50% | ||
29.6% | CAGR | |||
$365.6 | 30.8% | Tier II – 75% | ||
30.8% | CAGR | |||
$378.8 | 31.9% | Tier III – 100% | ||
31.9% | CAGR | |||
$390.9 | 33.0% | Tier IV (Max) – 200% | ||
33.0% | CAGR |
| | 2025 Performance (amounts in millions) | | |
| 2021 Actuals | Adjusted EBITDA | % of Change Based on 2021 Results | Payout % |
TTEC EMEA Adjusted EBITDA | $10.0 | <$30.7 | 32.4% | Threshold – 0% |
32.4% | CAGR | |||
$32.4 | 34.2% | Tier I – 50% | ||
34.2% | CAGR | |||
$34.5 | 36.3% | Tier II – 75% | ||
36.3% | CAGR | |||
$36.7 | 38.4% | Tier III – 100% | ||
38.4% | CAGR | |||
$39.0 | 40.5% | Tier IV (Max) – 200% | ||
40.5% | CAGR |
APPENDIX B
Executive Stock Ownership Guidelines
Equity provides the opportunity for the company to further invest in the employees who passionately uphold our values while driving the business with an entrepreneurial spirit. Company leaders who think and act like owners are crucial to our success and encouraging star players to actively participate in company growth is key to building our future together.
When a company’s board of directors, shareholders and employees align their interest in organization’s long-term success, the stage is set for true transformation. To that end, TTEC has adopted Stock Ownership Guidelines to encourage company leaders (vice president-level and above) to align their interests with TTEC and our stockholders and to focus on value creation, while sharing in the company’s success. The following are answers to questions you may have about TTEC’s new Executive Stock Ownership Guidelines.
Executive Stock Ownership Guidelines
Q. Why are we implementing an Ownership Guideline?
A. The Guidelines are designed to align our senior leaders’ interests with our shareholders’ interest, driving a long-term vision and commitment to creating company value. The Executive Ownership Guidelines are also designed to:
● | Support confidence in company strategy to execute our business transformation |
● | Allow us to remain an attractive and competitive choice for executive-level talent by adopting best practices |
● | Align executive behavior with external shareholder expectation |
● | Drive long-term accountability |
● | Enable company success |
Q. Do I have to buy TTEC stock to meet this holding Guideline?
A. TTEC does not expect you to buy TTEC stock to meet the holdings Guidelines, and how you meet them is entirely up to you. Most employees will be able to meet the requirement by holding a portion of their annual equity grant (net of tax), as it vests.
Q. How much stock should I hold as a company leader?
A. The new Executive Stock Ownership Guidelines call for TTEC vice presidents and above to hold a multiplier of base compensation in TTEC stock (based on Fair Market Value (FMV) of stock as it trades on NASDAQ). Employees will have five years from the start of this requirement (or promotion into a new role) to meet the holding Guidelines.
Executive Level | Target Holding Amount within 5 years of appointment |
Chief Executive Officer for a Business Segment Global Chief Operating Officer | 4 times current base salary |
Chief Financial Officer | 3 times current base salary |
Chief Revenue Officer and other Executive Vice President level executives | 2.5 times current base salary |
General Counsel Chief Information Officer Chief Security Officer Chief People Officer Business Segment Chief Operating Officers and other Senior Vice President level executives | 1.5 times current base salary |
Group Vice Presidents | 0.5 times current base salary |
Q. How many shares should I consider holding from each RSU grant to meet the holding Guidelines?
A. How much you hold from each grant and from each vesting event is entirely up to you. Based on basic modeling, however, we believe that if you hold a percentage of each vesting event from annual Equity
Grants (net of tax as indicated in the table below) you should comfortably reach the holding requirement in five years or sooner.
The holding guideline can be satisfied with any stock you hold including:
• | the exercise of options to purchase the company’s common stock |
• | the vesting of restricted stock; and |
• | the vesting of performance shares. |
Executive Level | % of Net Received Shares to Hold |
Group Vice Presidents | 50% |
All Other Executives Subject to TTEC Executive Shareholding Requirement | 75% |
Once the holding target is reached, you should maintain it during your entire tenure in the role; and as your role changes be aware of the changes in the holding guidelines as well.
Q. What happens if I don’t reach my target holding amount within the five-year time frame due to market volatility or amount of my equity awards?
A. If the actual Equity Grants you receive and/or market price volatility does not allow an employee to reach the target holding level within the required five-year time frame, the company does not expect employees to invest out of pocket. The company expects the Equity Grants you receive to be the source for the holding requirement and we look to you as a leader to exercise a good faith effort to honor the requirements. If the Equity Grants you receive or market volatility creates a challenge, discuss the matter with your supervisor and your HC partner for a practical resolution.
Q. What if I have a special situation (hardship) that makes maintaining the holding requirement difficult for me?
A. The Executive Ownership Guidelines is designed to align your interests with the company’s interests and position you to share in our success. If your personal situation makes the compliance with the Ownership Guidelines a hardship, speak to your HC partner and the Executive Committee level executive responsible for your business segment for guidance and support.
Q. Whom should I contact with questions?
A. If you have questions, please contact Pam LeMasters, executive director, Global Compensation via email or by phone at 303.397.8531.
APPENDIX C
VC-PRSU VESTING FOLLOWING CHANGE IN CONTROL (Double Trigger).
1. Accelerated Vesting. Notwithstanding the vesting schedule contained in Agreement, (a) upon a “Change in Control” (as defined below), and (ii) if Grantee’s services for the Company (or its successors) are terminated by the Company (or its successor), on or before the one year anniversary of such Change in Control unless stated otherwise in an employment agreement or elsewhere, any unvested VC-PRSUs that would otherwise vest on or after the effective date of such Change in Control shall be accelerated and become vested on the effective date of such termination of services as if the relevant Operating Group performed at Tier II.
The accelerated vesting described herein shall not apply if the termination of services is (A) by Grantee for any reason other than for “Good Reason” (as defined below), or (B) by the Company (or successor) for “Cause” as defined in the Plan.
a. | Any consolidation, merger or other similar transaction (i) involving TTEC, if TTEC is not the continuing or surviving corporation, or (ii) which contemplates that all or substantially all of the business and/or assets of TTEC will be controlled by another corporation; |
b. | Any sale, lease, exchange or transfer (in one transaction or series of related transactions) of all or substantially all of the assets of TTEC (a “Disposition”); provided, however, that the foregoing shall not apply to any Disposition to a corporation with respect to which, following such Disposition, more than 51% of the combined voting power of the then outstanding voting securities of such corporation is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners of at least 51% of the then outstanding Common Stock and/or other voting securities of TTEC immediately prior to such Disposition, in substantially the same proportion as their ownership immediately prior to such Disposition; |
c. | Approval by the stockholders of TTEC of any plan or proposal for the liquidation or dissolution of TTEC, unless such plan or proposal is abandoned within 60 days following such approval; |
d. | The acquisition by any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the U.S. Securities Exchange Act of 1934, as amended), or two or more persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the U.S. Securities Exchange Act of 1934, as amended) of 51% or more of the outstanding shares of voting stock of TTEC; provided, however, that for purposes of the foregoing, “person” excludes Kenneth D. Tuchman and his affiliates; provided, further that the foregoing shall exclude any such acquisition (A) by any person made directly from TTEC, (B) made by TTEC or any Affiliate, or (C) made by an employee benefit plan (or related trust) sponsored or maintained by TTEC or any Affiliate; or |
e. | If, during any period of 15 consecutive calendar months commencing at any time on or after the Grant Date, those individuals (the “Continuing Directors”) who either (i) were directors of TTEC on the first day of each such 15-month period, or (ii) subsequently became directors of TTEC and whose actual election or initial nomination for election subsequent to that date was approved by a majority of the Continuing Directors then on the board of directors of TTEC, cease to constitute a majority of the board of directors of TTEC. |
3. | Other Definitions. The following terms have the meanings ascribed to them below: |
a. | “Good Reason” means with respect to any Grantee who is an employee |
(i) any material reduction in Grantee’s base salary; provided that a reduction in Grantee’s base salary of 10% or less does not constitute “Good Reason” if such reduction is affected in connection with a reduction in compensation that is applicable generally to officers and senior management of the Company;
(ii) Grantee’s responsibilities or areas of supervision within TTEC or its Subsidiaries are substantially reduced; or
(iii) Grantee’s principal office is relocated outside the metropolitan area in which Grantee’s office was located immediately prior to the Change in Control; provided, however, that temporary assignments made in the best interest of the Company’s business shall not constitute such a move of office location.
(iv) In addition, no termination of a Grantee’s employment or service shall be deemed to be for Good Reason unless (x) Grantee provides the Company with written notice setting forth the specific facts or circumstances constituting Good Reason within thirty (30) days after the initial existence of the occurrence of such facts or circumstances, (y) the Company or, if different, the Affiliate which employs Grantee has failed to cure such facts or circumstances within thirty (30) days of its receipt of such written notice, and (z) the effective date of the termination for Good Reason occurs no later than ninety (90) days after the initial existence of the facts or circumstances constituting Good Reason.
b. | “Termination of Service Date” means the date upon which Grantee’s services for the Company (or successor) terminate and for a Grantee who is then an employee, shall mean the latest day on which Grantee is expected to report to work and is responsible for the performance of services to or on behalf of the Company (or successor) or any Affiliate (regardless of the reason for the termination and whether or not later to be found invalid or in breach of employment laws in the jurisdiction where Grantee is employed or the terms of Grantee’s employment agreement, if any), notwithstanding of any notice period mandated by law during which Grantee may be entitled to receive payments from the Company (e.g., for unused vacation or sick time, severance payments, deferred compensation or otherwise) and which may extend beyond such date; and |
c. | “Termination of Service ” shall mean: |
(i) As to a director, the time when a Grantee who is a director ceases to be a director for any reason, including, without limitation, a termination by resignation, failure to be elected, death or retirement, but excluding terminations where the Grantee simultaneously commences employment with the Company (successor) or any subsidiary or remains in employment or service with the Company (or successor) or any Affiliate in any capacity.
(ii) As to an employee, the time when the employee-employer relationship between a Grantee and the Company (or successor) or any Affiliate is terminated for any reason, including, without limitation, a termination by resignation, discharge, death, disability or retirement; but excluding terminations where the Grantee simultaneously commences service with TTEC as a director.
(iii) As to a consultant, the time when a Grantee who is a consultant ceases to be a consultant for any reason, including without limitation, completion of a contract term, failure to renew the consultant relationship, death or retirement, but excluding terminations where the Grantee simultaneously commences service with TTEC as an employee.).
4. 409A Treatment. Notwithstanding any provision herein to the contrary, for purposes of determining whether Grantee’s service for the Company have terminated with respect to Change in Control, Grantee will not be treated as having his/her services terminated unless such termination constitutes a “separation from service” as defined for purposes of Section 409A of the Code (“Section 409A”) with regard to Grantees who are subject to Section 409A. If Grantee has a “separation from service” following a Change in Control pursuant to Appendix C, the equity vesting as a result of such “separation from service” will be paid on a date determined by TTEC (or successor) within 5 days of Grantee’s “separation from service.” If Grantee is a “specified employee” (within the meaning of Section 409A) with respect to TTEC at the time of a “separation from service” and Grantee becomes vested in VC-PRSUs as a consequence of a “separation from service,” the delivery of property in settlement of such vested VC-PRSUs shall be delayed until the earliest date upon which such property may be delivered to Grantee without being subject to taxation under Section 409A.
This Agreement and the Award are intended to be exempt from the provisions of Section 409A and Department of Treasury regulations and other interpretive guidance issued thereunder, as providing for any payments to be made within the applicable “short-term deferral” period (within the meaning of Section 1.409A-1(b)(4) of the Department of Treasury regulations) following the lapse of a “substantial risk of forfeiture” (within the meaning of Section 1.409A-1(d) of the Department of Treasury regulations). Notwithstanding any provision of this Agreement to the contrary, in the event that the Committee determines that the Award may be subject to Section 409A, the Committee, in its sole discretion, may adopt amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, from time to time, without the consent of Grantee, that the Committee determines are necessary or appropriate to (a) exempt the Award from Section 409A and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A and related Department of Treasury guidance and thereby avoid the application of penalty taxes under Section 409A.
APPENDIX D
SPECIAL PROVISIONS FOR THE AWARD IN CERTAIN COUNTRIES
This Appendix includes special country-specific terms that apply to residents in the countries listed below. This Appendix is part of the Agreement and is incorporated into the Agreement by reference. Unless otherwise provided below, capitalized terms used but not defined in this Appendix shall have the same meanings assigned to them in the Plan and the Agreement.
This Appendix also includes information with respect to Grantee’s participation in the Plan. It is each Grantee’s responsibility to be aware of the terms of this Appendix. For example, certain individual exchange control reporting requirements may apply upon vesting of the VC-PRSUs and/or sale of Common Stock. The information is based on the securities, exchange control and other laws in effect in the respective countries as of July 1, 2021 and is provided for informational purposes. Such laws are often complex and change frequently, and results may be different based on the particular facts and circumstances. Therefore, TTEC strongly recommends that Grantee not rely exclusively on the information noted in this Appendix as the only source of information relevant to the consequences of Grantee’s participation in the Plan, because the information may be out of date at the time Grantee’s VC-PRSUs vest or are settled, or Grantee sells shares of Common Stock acquired under the Plan.
In addition, the information provided in this Appendix is general in nature and may not apply to Grantee’s particular situation, and TTEC is not in a position to assure Grantee of any particular result, especially results that may relate to the Grantee’s particular tax consequences. Accordingly, Grantees are advised to seek appropriate professional advice as to how the relevant laws in their country may apply to their particular situation.
Finally, if Grantee is a citizen or resident of a country other than the one in which Grantee currently is working, transfers employment after the VC-PRSUs are granted, or is considered a resident of another country for local law purposes, the information contained in this Appendix may no longer be applicable to Grantee or information with respect to different country may become relevant.
If the Grantee is resident in a country other than the U.S. or a country listed in this Appendix, at the time of the VC-PRSU Award or at the time of its vesting or settlement, the Grantee should consider reaching out to his/her HC partner for additional information.
Australia
Securities Law Information. If Grantee acquires shares of Common Stock pursuant to the VC-PRSUs and offers the shares of Common Stock for sale to a person or entity resident in Australia outside of the process established by the Company, the offer may be subject to incremental disclosure requirements under Australian law. Grantee should obtain legal advice on such disclosure obligations, if any, prior to making any such offer.
Exchange Control Information. Exchange control reporting is required for cash transactions exceeding AUD$10,000 and for international fund transfers. The Australian bank assisting with the transaction will file the report for Grantee. If there is no Australian bank involved in the transfer, Grantee will have to file the report.
Belgium
Foreign Asset / Account Reporting Information. Grantee is required to report any securities (e.g., shares of Common Stock) or bank accounts opened and maintained outside Belgium on their annual tax return. In a separate report, certain details regarding such foreign accounts (including the account number, bank name and country in which such account was opened) must be provided to the Central Contact Point of the National Bank of Belgium. The forms to complete this report are available on the website of the National Bank of Belgium.
Stock Exchange Tax. A stock exchange tax applies to transactions executed by a Belgian resident through a financial intermediary, such as a bank or broker. If the transaction is conducted through a Belgian financial intermediary, it may withhold the stock exchange tax, but if the transaction is conducted through a non-Belgian financial intermediary, the Belgian resident may need to report and pay the stock exchange tax directly. The stock exchange tax likely will apply when shares of Common Stock acquired under the Plan are sold. Belgian residents should consult with a personal tax or financial advisor for additional details on their obligations with respect to the stock exchange tax.
Brokerage Account Tax. A brokerage account tax applies to Belgian residents if the average annual value of securities (including shares of Common Stock acquired under the Plan) held in a brokerage account exceeds certain thresholds. Belgian residents should consult with a personal tax or financial advisor for additional details on their obligations with respect to the brokerage account tax.
Brazil
Compliance with Laws. By Grantee’s signature on the Agreement, Grantee agrees that he/she will comply with Brazilian law when he/she vests in the VC-PRSUs and sells shares of Common Stock. Grantee also agrees to report and pay any and all taxes associated with the vesting of the VC-PRSUs, the sale of the shares of Common Stock acquired pursuant to the Plan and the receipt of any dividends.
Exchange Control Information. Grantee must prepare and submit a declaration of assets and rights held outside of Brazil to the Brazilian Central Bank on an annual basis, if Grantee holds assets or rights denominated in foreign currency and valued at or in excess of US $100,000. The assets and rights that must be reported include shares of Common Stock and VC-PRSUs .
Bulgaria
No Entitlement. By accepting the VC-PRSU Award, Grantee acknowledges that the VC-PRSU Award is intended as an incentive for Grantee to remain employed with the Company and is not intended as remuneration for labor services performed.
Responsibility for taxes. Without limitation to Section 6.6 of the Agreement, Grantee agrees that Grantee is liable for any and all tax arising as a result of this Award, including income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other payments, whether or not subject to withholding at the source (“Tax-Related Items”) and hereby covenants to pay all such Tax-Related Items, as and when requested by the Company or any tax authority. Bulgarian residents should consult with a personal tax or financial advisor for additional details on their obligations with respect to the Tax-Related Items.
Canada
Settlement of VC-PRSUs. Notwithstanding any terms and conditions of the Plan or the Agreement to the contrary, VC-PRSUs will be settled in shares of Common Stock only, not cash.
Securities Law Information. Grantee acknowledges and agrees that Grantee will sell shares of Common Stock acquired through participation in the Plan outside of Canada only through the facilities of a stock exchange on which the Common Stock is listed. Currently, the shares of Common Stock are listed on the Nasdaq Stock Market.
Termination Date. This provision replaces the definition of Termination Date in Section 3(a) of the Agreement:
For purposes of the Agreement, the “Termination Date” shall mean the earlier of (1) the date Grantee is no longer actively providing service to the Company or (2) the date Grantee receives notice of Termination of Service from the Employer, regardless of any notice period or period of pay in lieu of such notice required under applicable laws (including, but not limited to statutory law, regulatory law and/or common law).
The following provisions apply if Grantee is resident in Quebec:
Language Acknowledgment
The parties acknowledge that it is their express wish that the Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, including this Appendix, be provided to them in English.
Consentement relatif à la langue utilisée. Les parties reconnaissent avoir expressément souhaité que la convention («Agreement») ainsi que tous les documents, avis et procédures judiciares, éxécutés, donnés ou intentés en vertu de, ou liés directement ou indirectement à la présente convention, ainsi que cette Annexe, soient rédigés en langue anglaise.
Data Privacy. This provision supplements Section 6.9 of the Agreement:
Grantee hereby authorizes TTEC, the Employer and their representatives to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan. Grantee further authorizes TTEC and its Subsidiaries to disclose and discuss the Plan with their advisors. Grantee further authorize TTEC and its Subsidiaries to record such information and to keep such information in Grantee’s employee file.
Costa Rica
There are no special provisions.
Germany
Exchange Control Information. Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank. In case of payments in connection with the sale of shares of Common Stock acquired under the Plan, the report must be filed electronically by the 5th day of the month following the month in which the payment was received. The form of report (“Allgemeine Meldeportal Statistik”) can be accessed via the Bundesbank’s website (www.bundesbank.de) and is available in both German and English. It is Grantee’s responsibility to comply with this reporting obligation and Grantee should consult with their personal tax advisor in this regard.
Foreign Asset/Account Reporting Information. If Grantee’s acquisition of shares of Common Stock under the Plan leads to a “qualified participation” at any point during the calendar year, Grantee will need to report the acquisition when Grantee files their tax return for the relevant year. A “qualified participation” is attained if (i) the value of the shares of Common Stock acquired exceeds a certain threshold or (ii) in the unlikely event Grantee holds shares of Common Stock exceeding a certain threshold of the total Common Stock.
Greece
Vesting and Issuance of Shares; Dividend Equivalents. Notwithstanding any provisions of the Agreement to the contrary, and for purposes of the VC-PRSU Award under this Agreement only, if the Grantee’s employment terminates due to retirement, as that concept is defined under the relevant provisions of Greek labor law on retirement, the shares of Common Stock subject to the VC-PRSUs shall continue to vest according to the schedule set forth in the Agreement, notwithstanding such retirement related termination of employment.
India
Exchange Control Notification. Grantees understand and acknowledge that they must repatriate to India any proceeds from the sale of shares of Common Stock acquired under the Plan and any cash dividends received in relation to such shares; and to convert such repatriated funds into local currency within ninety (90) days of receipt, and any cash dividends paid on shares of Common Stock acquired under the Plan within hundred and eighty (180) days of receipt or for both foregoing scenarios such other period as required under applicable regulations. Grantee must obtain a Foreign Inward Remittance Certificate (“FIRC”) from the bank where Grantee deposits the foreign currency and shall maintain the FIRC as evidence of the repatriation of funds in the event the Reserve Bank of India or the Company requests proof of repatriation. It is Grantee’s responsibility to comply with these requirements.
Foreign Asset / Account Reporting Information. Grantee is required to declare any foreign bank accounts and assets (including shares of Common Stock acquired under the Plan) on their annual tax return. Grantees should consult with their personal tax advisors to determine their reporting requirements.
Ireland
Manner of Payment. Notwithstanding any discretion provided in the Plan or the Agreement to the contrary, upon vesting of the VC-PRSUs, shares will be issued to Grantee. In no event will the VC-PRSU Award be paid to Grantee in the form of cash.
Exclusion from Termination Indemnities and Other Benefits. By accepting the VC-PRSUs, Grantee acknowledges, understands, and agrees that the benefits received under the Plan are not a remuneration for past services but an incentive provided for future loyalty and will not be taken into account for any redundancy or unfair dismissal claim.
Mexico
Labor Law Policy and Acknowledgment. By Grantee’s signature on the Agreement, Grantee expressly recognizes that TTEC Holdings, Inc., with offices at 9197 South Peoria Street, Englewood, Colorado, U.S.A., is solely responsible for the administration of the Plan and that Grantee’s participation in the Plan and acquisition of shares does not constitute an employment relationship between Grantee and TTEC Holdings Inc., since Grantee is participating in the Plan on a wholly commercial basis and his or her sole employer is TTEC CX Solutions Mexico, S.A. de C.V. located in Mexico (“TTEC-Mexico”), not TTEC Holdings, Inc., a company in the United States. Based on the foregoing, Grantee expressly recognizes that the Plan and the benefits that Grantee may derive from participation in the Plan do not establish any additional rights between Grantee and TTEC-Mexico (his/her employer), and do not form a part of the employment conditions and/or benefits provided by TTEC-Mexico and any modification of the Plan or its termination shall not constitute a change or impairment of the terms and conditions of his/her employment.
Grantee further understands that his/her participation in the Plan is a result of a unilateral and discretionary decision of TTEC Holdings, Inc.; therefore, TTEC reserves the absolute right to amend and/or discontinue Grantee’s participation at any time without any liability to him or her.
Finally, Grantee hereby declares that he or she does not reserve to himself or herself any action or right to bring any claim against TTEC for any compensation or damages regarding any provision of the Plan or the benefits derived under the Plan, and Grantee therefore grants a full and broad release to TTEC, its Affiliates, branches, representation offices, its shareholders, officers, agents or legal representatives with respect to any claim that may arise.
Política Laboral y Reconocimiento/Aceptación. Aceptando este Premio1, el Grantee (“Grantee”) reconoce que TTEC, con oficinas en 9197 South Peoria Street, Englewood, Colorado, U.S.A., es el único responsable de la administración del Plan y que la participación del Grantee en el mismo y la adquisicion de acciones no constituye de ninguna manera una relación laboral entre el Grantee y TTEC, toda vez que la participación del participante en el Plan deriva únicamente de una relación comercial con TTEC, reconociendo expresamente que el único empleador del participante lo es TTEC CX Solutions Mexico, S.A. de C.V. en Mexico (“TTEC-Mexico”), no es TTEC en los Estados Unidos. Derivado de lo anterior, el participante expresamente reconoce que el Plan y los beneficios que pudieran derivar del mismo no establecen ningún derecho entre el participante y su empleador, TTEC-México, y no forman parte de las condiciones laborales y/o prestaciones otorgadas por TTEC-México, y expresamente el participante reconoce que cualquier modificación el Plan o la terminación del mismo de manera alguna podrá ser interpretada como una modificación de los condiciones de trabajo del Grantee.
Asimismo, el Grantee entiende que su participación en el Plan es resultado de la decisión unilateral y discrecional de TTEC, por lo tanto, TTEC se reserva el derecho absoluto para modificar y/o terminar la participación del participante en cualquier momento, sin ninguna responsabilidad para el Grantee.
Finalmente, el Grantee manifiesta que no se reserva ninguna acción o derecho que origine una demanda en contra de TTEC, por cualquier compensación o daño en relación con cualquier disposición del Plan o de los beneficios derivados del mismo, y en consecuencia el participante otorga un amplio y total finiquito a TTEC, sus entidades relacionadas, Afiliadas, oficinas de representación, sus accionistas, directores, agentes y representantes legales con respecto a cualquier demanda que pudiera surgir.
1 El término “Premio” se refiere a la palabra “RSU”
Netherlands
No Entitlement. By accepting the VC-PRSUs, Grantee acknowledges that the VC-PRSU is intended as an incentive for Grantee to remain employed with the Company and is not intended as remuneration for labor performed.
New Zealand
There are no special provisions.
Philippines
Securities Law Information. The sale or disposal of shares of Common Stock acquired under the Plan may be subject to certain restrictions under Philippine securities laws. Such restrictions should not apply if the offer and resale of the shares of Common Stock takes place outside of the Philippines through the facilities of a stock exchange on which the shares of Common Stock are listed. The shares of Common are currently listed on the Nasdaq Stock Market in the United States of America.
Poland
Foreign Asset/Account Reporting Information. If Grantee maintains bank or brokerage accounts holding cash and foreign securities (including shares of Common Stock) outside of Poland, Grantee will be required to report information to the National Bank of Poland on transactions and balances in such accounts if the value of such cash and securities exceeds PLN 7,000,000. If required, such reports must be filed on a quarterly basis on special forms available on the website of the National Bank of Poland.
Exchange Control Information. The transfer of funds in excess of a certain threshold (currently €15,000, unless the transfer of funds is considered to be connected with the business activity of an entrepreneur, in which case a lower threshold may apply) into or out of Poland must be made through a bank account in Poland. Grantee understands that he or she is required to store all documents connected with any foreign exchange transactions for a period of five years, as measured from the end of the year in which such transaction occurred. Grantee should consult with their personal legal advisor to determine what he or she must do to fulfill any applicable reporting/exchange control duties.
United Kingdom
Responsibility for Taxes. This provision supplements Section 6.6 of the Agreement: Without limitation to Section 6.6 of the Agreement, Grantee agrees that Grantee is liable for any and all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related withholding (“Tax-Related Items”) and hereby covenants to pay all such Tax-Related Items, as and when requested by the Company or by Her Majesty’s Revenue and Customs (“HMRC”) or any other tax authority or any other relevant authority. Grantee also agrees to indemnify and keep indemnified the Company against any Tax–Related Items that he/she is required to pay or withhold or have paid or will pay to HMRC (or any other tax authority or any other relevant authority) on Grantee’s behalf.
Notwithstanding the foregoing, if Grantee is a director or executive officer (within the meaning of Section 13(k) of the Exchange Act, as amended), Grantee understands that they may not be able to indemnify the Company for the amount of any Tax-Related Items not collected from or paid by Grantee, in which case the indemnification could be considered to be a loan. In this case, the Tax-Related Items not collected or paid may constitute a benefit to Grantee on which additional income tax and National Insurance contributions (“NICs”) may be payable. Grantee understands that he/she will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for paying to the Company the amount of any NICs due on this additional benefit, which may also be recovered from Grantee by any of the means referred to in Section 6.6 of the Agreement.
Manner of Payment. Notwithstanding any discretion in the Plan or the Agreement to the contrary, upon vesting of the VC-PRSUs, shares of Common Stock will be issued to Grantee. In no event will the VC-PRSU Award be paid to Grantee in the form of cash.
Furthermore, notwithstanding any provision of the Plan or the Agreement to the contrary, Grantee will not be entitled to receive any shares of Common Stock pursuant to the vesting of the VC-PRSUs unless and until Grantee has executed a Joint Election (as defined below) in connection with the VC-PRSUs.
Joint Election. As a condition of the grant of VC-PRSUs, Grantee agrees to accept any liability for secondary Class 1 National Insurance contributions (the “Employer NICs”) which may be payable by the Company with respect to the vesting of the VC-PRSUs or otherwise payable with respect to a benefit derived in connection with the VC-PRSUs.
Without limitation to the foregoing, Grantee agrees to execute a joint election between the Company and Grantee (the “Joint Election”), the form of such Joint Election being formally approved by HMRC, and any other consent or election required to accomplish the transfer of the Employer NICs to Grantee. Grantee further agrees to execute such other joint elections as may be required between Grantee and any successor to the Company. If Grantee does not enter into a Joint Election, no shares of Common Stock shall be issued to Grantee without any liability to the Company. Grantee further agrees that the Company may collect the Employer NICs from Grantee by any of the means set forth in the Agreement.
The Joint Election shall be provided to the Grantee at the time of the VC-PRSU Award. If Grantee has signed a Joint Election in the past with respect to an VC-PRSU Award granted to them by the Company and that Joint Election applies to all grants made under the Plan, Grantee need not sign another Joint Election in connection with this VC-PRSU Award.
EXHIBIT 10.84
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (“Agreement”) is by and between TTEC Services Corporation, a Colorado company (“TTEC” or the “Company”), a wholly owned subsidiary of TTEC Holdings, Inc., a Delaware corporation (“TTEC Parent”), and Michelle “Shelly” Swanback ("Executive" or “Swanback”), each a “Party” and together the “Parties.” The Executive Employment Agreement is executed to be effective as of May 2, 2022 (“Effective Date”).
1.Appointment.
TTEC Parent is aware that Ms. Swanback is currently serving as a member of the board of directors of Willis Towers Watson Plc and has no objection to the appointment at this time, provided Ms. Swanback’s activities on this board do not conflict nor interfere with her responsibilities to TTEC Parent and the Company.
2.Compensation.
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In addition, the Compensation Committee of the Board may, but shall not be obligated to, adjust the Executive’s VIP award upward based on TTEC Parent and TTEC Engage segments’ performance against annual metrics set by the Board and deemed to be that year’s business imperatives, such as but not limited to annual bookings and backlog, revenue, adjusted EBITDA, operating income, and cash flow.
Currently, TTEC offers its equity grants in the form of restricted stock units (the “RSUs) and performance restricted stock units (“PRSUs”) vesting over a period of years. Until and unless modified by the Compensation Committee of the Board, the Executive shall be eligible for an annual RSU equity grant opportunity and annual PRSU equity grant opportunity of up to $500,000, each, in fair market value of TTEC equity, based on the market value of TTEC stock at the time of the grant. The RSU grants are usually time based with a four-year vesting schedule; while the PRSUs are performance-based equity with a three-year cliff-vesting schedule based on the performance of the business during the three-year measurement period, and an opportunity to overperform up to 200% of the original grant.
The RSUs/PRSUs are granted under the terms of grant-specific agreements that are approved by the Compensation Committee of the Board from time to time (“Equity Agreements). These Equity Agreements provide vesting schedules, performance metrics, if any, and other material terms of each grant. TTEC Parent and the Compensation Committee of the Board reserve the right, at their discretion, to change the terms of future Equity Agreements and the equity granted thereunder. The use of the RSUs/PRSUs, as part of the annual equity grant, is discretionary and may be substituted, at the discretion of the Compensation Committee of the Board, by other equity instruments in accordance with incentive compensation plans adopted by TTEC Parent from time to time. All grants as part of TTEC Parent Equity program are subject to Executive Stock Ownership Guidelines included in this Agreement as Exhibit D.
The timing for the payment of the VIP and Equity awards, if any, is determined from time to time (usually annually) by the Compensation Committee of the Board.
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TTEC Parent shall grant to the Executive the value creation performance based restricted stock (“VC-PRSU”) award in the amount of 75,000 VC-PRSUs. This VC-PRSU award will cliff-vest in 2026, based on TTEC Engage business segment’s performance during 2025 fiscal year. The actual number of TTEC shares that will vest in connection with this VC-PRSU award will depend on TTEC Engage business segment’s 2025 revenue and adjusted EBITDA and may range between zero and 150,000 shares (200% of the initial grant) in TTEC stock. Specific terms and conditions of the award and its terms of vesting are documented in a VCP-PRSU agreement, attached hereto as Exhibit E and incorporated herein by reference (“VC Equity Agreement.”)
This VC-PRSU one-time award is separate and distinct from the Executive’s annual equity compensation incentive opportunities outlined in Paragraph 2(c) of this Agreement.
4.Benefits.
a.Health and Welfare Benefits. Ms. Swanback shall be eligible to participate in TTEC health and wellness plans in a manner similar to others at her level of responsibility at TTEC Parent, including participation for the Executive and her dependents in TTEC group medical, vision, and dental insurance and other welfare plans, as they continue or change from time to time. The eligibility for most wellness benefits starts on the first day of the month following 30 days’ employment tenure with the Company, and given the Effective Date will start for the Executive on July 1, 2022.
b.Miscellaneous Benefits. The Executive shall be eligible for benefits generally applicable to other senior management employees of the Company, as they are in effect from time to time, including TTEC 401(k) Plan and its Deferred Compensation Plan.
c.Paid Leave. The Executive shall be eligible to participate in paid time off (“PTO”) and sick leave benefit programs pursuant to the Company’s current time off/leave policy (or any other vacation/sick policy then in effect). The Executive will also be paid for time off for holidays in accordance with the TTEC holiday policy.
5.Change in Control.
For purposes of this Agreement, “Change in Control” event shall mean the occurrence of any one of the following:
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EXHIBIT 10.84
(i)Any consolidation, merger or other similar transaction (i) involving TTEC Parent, if TTEC Parent is not the continuing or surviving corporation, or (ii) which contemplates that all or substantially all of the business and/or assets of TTEC Parent would be controlled by another corporation or legal entities not controlled by TTEC Parent;
(ii) Any sale, lease, exchange or transfer (in one transaction or series of related transactions) of all or substantially all of the assets of TTEC Parent (a “Disposition”); provided, however, that the foregoing shall not apply to any Disposition with respect to which, following such Disposition, more than 51% of the combined voting power of the then outstanding voting securities of the receiving entity for the Disposition are directly or indirectly (beneficially or otherwise) owned by all or substantially all of the individuals and entities that were the beneficial owners of at least 51% of the outstanding common stock and/or other voting securities of TTEC Parent immediately prior to such Disposition, in substantially the same proportion of total ownership as their ownership immediately prior to such Disposition;
(iii)Approval by the stockholders of TTEC Parent of any plan or proposal for the liquidation or dissolution of TTEC, unless such plan or proposal is abandoned within 60 days following such approval;
(iv) The acquisition by any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the U.S. Securities Exchange Act of 1934, as amended (“the Exchange Act”)), or two or more persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of 51% or more of the outstanding shares of voting stock of TTEC Parent; provided, however, that for purposes of the foregoing, the term “person” shall exclude Kenneth D. Tuchman and his affiliates; provided, further that the foregoing shall exclude any such acquisition (1) made directly from TTEC Parent, (2) made by TTEC Parent (directly or through an affiliated company), or (3) made by a TTEC employee benefit plan (or related trust) sponsored or maintained by TTEC Parent or any of its affiliates; or
6.Termination and Payments, Benefits On Termination.
a.Termination by the Executive. The Executive may terminate her employment with the Company with 90 days’ written notice of her intention. The parties may mutually agree to a different separation date including shorter notice period.
Ms. Swanback is not entitled to any separation related compensation , if she terminates her employment with the Company pursuant to this Paragraph 6(a).
b. Termination by the Company without Cause. Except as set forth in Paragraphs 6(c) (termination for Cause), Paragraph 6(d) (termination due to death), Paragraph 6(e) (termination due to disability), Paragraph 6(h) (Constructive Termination or Good Reason), and Paragraph 6(g) (Change in Control), the Company may terminate the Executive’s employment with 30 days’ written notice for any reason or no reason. In case of termination pursuant to this Paragraph 6(b), and provided Ms. Swanback executes a separation agreement in a form substantially similar to the agreement set forth in Exhibit G (attached hereto), releasing all legal claims except those that cannot legally be released and Ms. Swanback continues to comply with all terms of such separation agreement, and any other agreements signed by the Executive with the Company, the Executives shall be entitled to:
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EXHIBIT 10.84
(iv) Prorated VIP Cash Bonus. Annual cash bonus provided pursuant to Paragraph 2(b) (VIP bonus) shall be paid as provided in Paragraph 2(d) in March of the year following the performance year based on the audited results of TTEC operations for the full performance year and prorated, in straight line, based on the actual number of days the Executive was with the business during the performance year.
If the Company terminates this Agreement without Cause under this Paragraph 6(b), and the Company pays Ms. Swanback the compensation earned as of the effective date of the termination, and provides to Ms. Swanback incremental compensation and continuation of benefits on the terms specified in this Paragraph 6(b), the Company’s acts in doing so shall be in complete accord and satisfaction of any claim that Ms. Swanback has or may at any time have for compensation, benefits or payments of any kind from the Company or TTEC Parent arising from or relating in whole or part to the Executive’s employment with the Company and/or this Agreement. If the separation agreement and legal release referenced above is not signed within thirty (30) days from the date that such agreement is presented to Ms. Swanback (which the Company shall present no later than fifteen (15) days after the effective date of Executive’s termination), then Ms. Swanback waives her right to receive any severance or other compensation pursuant to this Agreement, even if Ms. Swanback were to successfully litigate any claim against the Company and/or TTEC Parent.
For purposes of this Agreement, “Cause” shall have the following meaning:
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EXHIBIT 10.84
If the act or acts constituting Cause are susceptible of cure, the Company will provide Executive with written notice setting forth the acts constituting Cause and providing the Executive with the opportunity to cure, assuming that such cure may be achieved in a reasonable time not to exceed thirty (30) business days of receipt of such notice. Any recurrence of acts constituting Cause within one (1) year of the original occurrence will void Executive’s right to such pre-termination right to cure.
f.Continuing Obligations. Ms. Swanback shall remain subject to the Company’s Agreement to Protect Confidential Information, Assign Inventions and Prevent Unfair Competition and Unfair Solicitation (“Confidentiality Agreements”), Equity Agreements, and any other similar agreements executed at any time during her employment, including without limitation this Agreement, all of which survive termination of employment.
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EXHIBIT 10.84
g.Termination In Connection with Change in Control Event. If a Change in Control event occurs, and at any time within fifteen (15) months of such Change in Control event’s effective date (“COC Period”) the Company, TTEC Parent, or its successor terminate Executive’s employment without Cause (as that term is defined in Paragraph 6(b)) whether such termination occurs outright or pursuant to a Constructive Termination (as defined in Paragraph 6(h)), and provided the Executive executes a separation agreement in a form substantially similar to the agreement set forth in Exhibit G (attached hereto), releasing all legal claims except for those that cannot legally be released and agreeing to continue to comply with all terms of such separation agreement, and any other agreements signed by the Executive with the Company or successor, the Executive shall be entitled to and the Company, TTEC Parent or its successor shall cause the following to occur:
(iv) Prorated VIP Cash Bonus. Annual cash bonus provided pursuant to Paragraph 2(b) (VIP bonus) shall be paid as provided in Paragraph 2(d), in March of the year following the performance year, based on the audited results of TTEC operations for the full performance year and prorated, in straight line, based on the actual number of days the Executive was with the business during the performance year.
(v)Termination Ahead of Change in Control Event. Notwithstanding anything in this Agreement to the contrary, if Executive’s employment is terminated (actually or pursuant to a Constructive Termination as defined in Paragraph 6(h) of this Agreement) within three (3) months before a Change in Control event occurs, then for purposes of this Agreement, the effective date of Change in Control event shall be deemed to be the date immediately prior to the date of such termination of employment.
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EXHIBIT 10.84
h. "Good Reason" or “Constructive Termination.” The Executive may terminate her employment with the Company for Good Reason with 90 days’ notice; provided the Company may elect to accept the Executive’s resignation sooner at its discretion. Termination by Executive for “Good Reason” or “Constructive Termination” by the Company may be triggered if, without Executive's express written consent, the occurrence of any of the following (in connection with or independent of a Change in Control event):
An action taken in good faith and which is remedied by TTEC Parent or successor within fifteen (15) calendar days after receipt of the Executive’s notice thereof shall not constitute Good Reason or Constructive Termination under this Agreement. Executive must provide notice of termination of employment within thirty (30) calendar days of Executive’s knowledge of an event constituting “Good Reason” or such event shall not constitute Good Reason or Constructive Termination under this Agreement.
In case of termination pursuant to this Paragraph 6(h), and provided that Ms. Swanback executes a separation agreement in a form substantially similar to the agreement set forth in Exhibit G (attached hereto), releasing all legal claims except for those that cannot legally be released and Ms. Swanback continues to comply with all terms of such separation agreement, and any other agreements signed by the Executive with the Company, the Executives shall be entitled to:
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EXHIBIT 10.84
If the Executive terminates her employment with the Company under this Paragraph 6(h), and the Company pays Ms. Swanback the compensation earned as of the effective date of the termination, and provides to Ms. Swanback incremental compensation and continuation of benefits on the terms specified in this Paragraph 6(h), the Company’s acts in doing so shall be in complete accord and satisfaction of any claim that Ms. Swanback has or may at any time have for compensation, benefits or payments of any kind from the Company or TTEC Parent arising from or relating in whole or part to the Executive’s employment with the Company and/or this Agreement. If the separation agreement and legal release referenced above is not signed within thirty (30) days from the date that such agreement is presented to Ms. Swanback (which the Company shall present no later than fifteen (15) days after the effective date of Executive’s termination), then Ms. Swanback waives her right to receive any severance or other compensation pursuant to this Agreement, even if Ms. Swanback were to successfully litigate any claim against the Company and/or TTEC Parent.
7.Non-Disclosure, Non-Competition and Non-Solicitation.
As a senior member of the executive leadership team of TTEC Parent, the Executive is privy to TTEC Parent company wide global business and financial strategy. Therefore, in addition to the provisions of the Confidentiality Agreements that the Executive signs at the time of her employment with the Company, the Executive agrees and covenants for a period of twelve (12) months post separation of her employment with the Company (whatever the reason for this separation) not to -
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EXHIBIT 10.84
The Executive also acknowledges that while employed by the Company or otherwise affiliated with TTEC Parent, the Executive has access to proprietary and unique trade secret information that would be valuable or useful to Company’s and TTEC Parent’s competitors and that the Executive has access to Company’s valuable customer relationships and thus acknowledges that the restrictions on the Executive’s future employment and business activities in TTEC’s industry as set forth in this Paragraph 7 are fair and reasonable.
The Executive acknowledges and she is prepared for the possibility that her standard of living may be reduced during the non-competition and/or non-solicitation period and assumes and accepts any risk associated with that possibility, and further acknowledges that any such drop in the Executive’s standard of living does not constitute undue hardship.
f.Consequences of Breach. If Executive breaches any of the material covenants and undertakings set forth in this Paragraph 7:
(i)The Executive and those who aid her in such breach shall be liable for all costs and business losses including any damages and out-of-pocket expenses associated with or resulting from such breach;
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EXHIBIT 10.84
(ii) TTEC Parent nor the Company have any further liabilities to the Executive pursuant to this Agreement, including without limitation no liability for any compensation including cash bonuses or equity not yet granted or granted and unvested;
(iii) All unvested equity held by the Executive shall be immediately forfeited and cancelled;
(iv) The value of any vested equity received by the Executive in connection with her employment with the Company must be paid by the Executive back to the Company since one of the primary purposes of the equity awards would not have been realized by TTEC Parent;
8.Miscellaneous.
The employment arrangement contemplated by this Agreement includes other related documents in addition to this Executive Employment Agreement, some of which are TTEC Parent and the Company’s standard documents not otherwise tailored to this transaction. To the extent any provisions of these related agreements contradict the clear provisions and terms of this Executive Employment Agreement, the provisions of this Agreement shall be controlling.
Concurrently with any Change in Control event or a business combination that may impact the legal implications of this Agreement, the Company, TTEC Parent shall cause any successor or transferee to assume unconditionally, by written instrument delivered to the Executive, all of the obligations of the Company and TTEC Parent hereunder. Failure of the Company or TTEC Parent to obtain such assumption prior to the effectiveness of any Change in Control event or other business combination, shall be a breach of this Agreement and shall constitute Constructive Termination entitling the Executive to resign, within thirty (30) calendar days of consummation of such Change in Control event or business combination, and receive compensation and benefits as provided in Paragraph 6(g).
This Agreement is for personal services and Ms. Swanback’s may not and shall not assign her rights or obligations hereunder.
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EXHIBIT 10.84
d.Governing Law and Dispute Resolution.
(i)Good Faith Negotiation Requirement. Ms. Swanback, TTEC Parent and the Company agree that in the event of any controversy or claim arising out of or relating to Ms. Swanback’s employment with and/or separation from the Company, they shall negotiate in good faith to resolve the controversy or claim privately, amicably and confidentially. Each Party may consult with counsel in connection with such negotiations.
(ii)Governing Law. This Agreement will be construed and interpreted in accordance with the laws of the State of Colorado without regard to conflict of law principles.
(iii)Disputes. The Parties agree that any action arising from or relating in any way to this Agreement, shall be resolved and tried in the state or federal courts situated in Denver, Colorado. The parties consent to jurisdiction and venue of those courts to the greatest extent allowed by law. In this regard, the Executive acknowledges and admits to all or a combination of several following substantial contacts with Colorado; the Executive is employed, provides services for or otherwise is affiliated with an
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EXHIBIT 10.84
legal entity headquartered in the state of Colorado; the Executive receives the compensation in a form of checks or wire transfers that are drawn either directly or indirectly, from bank accounts in Colorado; the Executive regularly interacts with, contacts and is contacted by other TTEC and Company employees and executives in Colorado; the Executive either routinely travels to or attends business meetings in Colorado; and the Executive receives substantial compensation and benefits as a result of TTEC Parent being a corporation headquartered in and subject to the laws of Colorado. Based on these and other contacts, the Executive acknowledges that she could reasonably be subject to the laws of Colorado.
e.Severability. If any court of competent jurisdiction declares any provision of this Agreement invalid or unenforceable, the remainder of the Agreement shall remain fully enforceable. To the extent that any court concludes that any provision of this Agreement is void or voidable, the court shall reform such provision(s) to render the provision(s) enforceable, but only to the extent absolutely necessary to render the provision(s) enforceable.
f.Modification of Agreement. This Agreement or any other term or condition of employment may not be modified by word or deed, except in writing signed by the Executive and the Global Chief Operating Officer, Chief People Officer, or Chief Executive Officer for TTEC Parent.
g.Waiver. No provision of this Agreement shall be deemed waived, nor shall there be an estoppel against the enforcement of any such provision, except by a writing signed by the party charged with the waiver or estoppel. No waiver shall be deemed continuing unless specifically stated therein, and the written waiver shall operate only as to the specific term or condition waived, and not for the future or as to any act other than that specifically waived.
h.Construction. Whenever applicable, masculine and neutral pronouns shall equally apply to the feminine genders; the singular shall include the plural and the plural shall include the singular. The Parties have reviewed and understand this Agreement, and each has had a full opportunity to negotiate the agreement's terms and to consult with counsel of their own choosing. Therefore, the Parties expressly waive all applicable common law and statutory rules of construction that any provision of this Agreement should be construed against the agreement's drafter, and agree that this Agreement and all amendments thereto shall be construed as a whole, according to the fair meaning of the language used.
i. Dodd-Frank Recoupment Provisions. TTEC Incentive Recoupment Policy, noted as Exhibit H, is incorporated in this Agreement by reference.
j. | Greatest Net Benefit. |
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EXHIBIT 10.84
Ms. Swanback acknowledges and agrees that she reviewed and fully understands the terms and provisions of this Agreement; that she enters into it freely, knowingly, and mindful of the fact that it creates important legal obligations and affects her legal rights; and that she understands the need to and has had the opportunity to consult with counsel (if she so wishes) concerning this Agreement with legal counsel.
Executive [Signature on file] ____________________ Michelle “Shelly” Swanback Date: April 29, 2022 | TTEC Services Corporation [Signature on file] ________________________ Regina M. Paolillo, Global COO Date: April 29, 2022 |
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Exhibit 31.1
CERTIFICATIONS
I, Kenneth D. Tuchman, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of TTEC Holdings, Inc.; | |
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2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
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3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
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4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
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| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
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| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 4, 2022
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| By: | /s/ KENNETH D. TUCHMAN |
| | Kenneth D. Tuchman |
| | Chairman and Chief Executive Officer |
| | (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATIONS
I, Dustin J. Semach, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of TTEC Holdings, Inc.; | |
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2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
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3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
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4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
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| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
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| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 4, 2022
| By: | /s/ DUSTIN J. SEMACH |
| | Dustin J. Semach |
| | Chief Financial Officer |
| | (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, the Chief Executive Officer of TTEC Holdings, Inc. (the “Company”), hereby certifies that, to his knowledge on the date hereof:
(a) | the Form 10-Q of the Company for the quarter ended March 31, 2022 filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and |
(b) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| By: | /s/ KENNETH D. TUCHMAN |
| | Kenneth D. Tuchman |
| | Chairman and Chief Executive Officer |
Date: May 4, 2022
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, the Chief Financial Officer of TTEC Holdings, Inc. (the “Company”), hereby certifies that, to her knowledge on the date hereof:
(a) | the Form 10-Q of the Company for the quarter ended March 31, 2022 filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and |
(b) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| By: | /s/ DUSTIN J. SEMACH |
| | Dustin J. Semach |
| | Chief Financial Officer |
Date: May 4, 2022